Thinking about "First Mover Advantage" has led me to the conclusion that it is actually the exact opposite, a disadvantage.
A first mover must invest time, money and resources to create a product/service, try to work out any bugs and problems, hopefully before the product makes it to market. When the product does hit market, the first mover must hope the demand for such a product is as they predicted (even more research and investment). Once the product is available, the first movers can only hope they protected the technology (patents, etc.) well enough to sustain a high market share and increase barriers for competitors to enter the picture.
If everything went perfect, the first mover would likely have landed market supremacy for at least the time being but what if any part of a first mover's efforts doesn't go as planned?
One bug with the product could be enough to ruin product line reputation and open the door for the first competitor who corrects it. What if the market research was wrong and customer's interest was over estimated or they are not willing to pay your price? What if the patents don't protect the product's technology adequately, the idea can be recreated by a competitor with little R&D (just enough to get around your patents), market research and the competitor will learn from any mistakes the first mover made.
If I had the choice, I would rather be the second or third competitor to market. I can tailor my product from lessons learned and gain a market share while enjoying large profit margins (while possibly being the cheapest option) due to the little investment required for me to compete.
I do agree that if the first mover's efforts do not go as planned there will be repercussions and their sales may suffer. However, I think to ensure the first mover succeeds is by having leaders who have experienced both success and failure. Take for example Apple Computers, they were first movers with the Newton and with the iPod. The lessons learned from the Newton's failure helped identify what Apple needed to focus on for the iPod's success. I agree there is a lot of risk associated with being the first mover, but, companies have been successful in doing so.
ReplyDeleteThere have been success stories of first movers, there's no arguing that.
ReplyDeleteHowever, I would argue that apple was the first mover with the iPod. There were many MP3 players before the iPod but today an iPod dominates the market.