First mover advantage is a marketing lie-most of the time.
It has stopped millions of entrepreneurs into believing that if they are not the first with a big idea-they are doomed.
“It’s better to be first than it is to be better,” said Al Ries and Jack Trout in their bestselling book ‘Immutable Laws of Marketing.’
But, being first with new innovations have driven a lot of entrepreneurs into the dustbin of history.
A paper by Peter N. Golder and Gerard J. Tellis described an analysis of 500 brands in 50 product categories that entered the new market.
“The first mover brands had 47% failure rate.
The follow-up brands had 8% failure rate.”
First Mover Advantage may not work for you.
It is a myth that carries on and on from marketing experts and business thought leaders.
Everybody accepts this as the gospel truth.
History says otherwise:
• Facebook was not the first social network.
• GM did not invent the car.
• Apple never built the first tablet, or MP3 player, or smartphone, or a mouse.
• Microsoft was not the first with most of the things- an operating system, office software, corporate email system, or the console.
• Google did not come up with the first search engine.
• McDonald’s was not the first hamburger restaurant.
• Coca-Cola was not the first soft drink.
• Wal-Mart was not the first supermarket.
There are a hundred more.
“Google, Microsoft, Facebook, Apple- none of these were First Movers.”
Sony Walkman, Motorola cell phones are a few product innovation examples where the first mover had an advantage for a few years.
Both companies are no longer in those businesses.
I agree that there are a few advantages of being a first mover:
• If your product is successful, you get brand recognition in double quick time.
• You can create larger and lasting impression on consumers.
• You can cream the market- in absence of any benchmark or competitive forces, you can price your product high and reap the immediate benefits.
• You also have an initial sales advantage.
• You can also manage to sustain this advantage over a period of time.
For example, Gillette’s safety razors, and Sony’s Personal Stereos.
But disadvantages of being a first mover are far too many to even merit a discussion.
• There could be a no market –If there was a market, Ten Chinese Companies would already be fighting in that space.
• It is far too expansive – The first mover has to create awareness for their product; create sufficient interest for the consumer to try the product and educate him on how to use the product.
If you are a small company, these costs can kill you.
“In the long run, the sales advantages are less than the advantages of increased costs.”
• As a first mover, you need to take care of new government regulations on the category, which can be very time-consuming. For example Tesla electric car and Uber taxis.
• You are locked into an old technology and you cannot change it as you are heavily invested in it.
All followers can use the new technology, which can give them cost and time advantage.
JIO is the prime example, where it is using the new technology and old players like Vodafone and Airtel are stuck with old technology.
They are so heavily invested in the old technology that it becomes impossible to get out of this mess.
“The late entrant can learn from the mistakes of pioneer and can save a huge amount of money in trying new things.”
• Version 1 is never perfect, and as a pioneer, you need to continuously spend money on research & development.
• Real innovators are mostly not good businessmen, hence even a breakthrough product may not become a viable business proposition.
A first mover advantage is perhaps a gift for competitive forces, as latecomers or followers may not come with better or more exciting products.
Apple’s stronghold on the tablet market remains unbroken because Samsung has not figured out a more forceful or meaningful reason for consumers to switch.
Why do followers or copycats win more often?
It’s pretty simple.
“First Movers tend to launch without really fully understanding customer problems or the product features that solve those problems.”
It also depends on how fast the technology or the market is growing.
What can we learn?
Believing in First Mover Advantage implies that you understand your business model, customers problems and the features needed to solve those problems.
That’s highly unlikely.
Therefore you’re either going to burn your cash or pray that the hype can help you with quick awareness and sales.
None of the market leaders in technology were the first movers.
Pioneers are always less profitable than No 2 or No 3
You need to understand that the cost of imitation is 60 % of innovation.
“Smart companies use imitation to gain a strategic edge.
Imitation often proves less costly and more effective than innovation.”
In the long run, innovators get less than 10 % market share.
Balance is taken up by Copycats, followers or imitators.
Hence, First to market can also mean First to fail.