The first mover’s advantages vs. fast followers’ advantages

 

footraceBack in the late ’90s during the dot.com boom everyone was trying to be first to market to gain first mover advantages. But what are those advantages?

  • Media relations – if you are first to market you are bound to garner more press and other media’s attention than being seen as an “also ran”.
  • If your market is not growing, then market share becomes a zero-sum game. Thus by being a first mover you may able to grab more market share, or at least grab the low hanging fruit first. Those following you will have to fight harder to gain share in a static market.
  • Attracting talent. Engineers like to be with “hot” companies, as they assume those companies will grow the fastest, exit the fastest, and make them richer than a following company.
  • Partnering – by being first to market you will have the pick of distribution, marketing, and other types of partners.
  • Exclusivity – you may be able to forge exclusive agreements with suppliers, partners and even customers, thus shutting out companies that follow you.
  • Intellectual property – if you can both file first and apply your patent first you may well get that patent or patents granted, potentially shutting out or slowing down competitors.

Going first seems like the smart strategy. But why is that behemoth companies like Apple and Microsoft are fast followers? For example, the iPhone was not the first smart phone, but it was the first to elegantly integrate the touch screen UI into a sleek form factor that enabled users to surf the web, send messages, take photos, listen to music and even make phone calls. So what are the advantages for fast followers?

  • The saying that “pioneers are the ones that get the arrows in the back” has some truth to it. There are all sorts of issues that a first mover can’t foresee that can trip them up, from government regulations to new technical standards.
  • Fast followers can sit back and see if there’s actually a market for the first mover’s product. Perhaps it is too small to bother with. Or it may be the wave of the future, as the cloud is. Amazon gained first mover advantage with AWS, but Microsoft, is closing fast from the fast follower position.
  • Fast followers can observe customer behavior: what do customers like about the first mover’s new product? What don’t they like? What features aren’t even used? What features are missing? Is it performance or a slick UI that attracts customers?
  • Determining the right business model is one of the toughest problems innovators face. By being a fast follower you can study the market and see if the pioneer’s business model is working. Perhaps the first movers try to price their product a la carte, but the fast follower sees that a subscription model would work better. First movers are then faced with having to change their business model, which may upset customers, whereas the fast followers can launch with the right business model in place.
  • Setting pricing is another one of the tough problem the first mover’s face with their new product. Perhaps they have priced the product too high, which leaves room for fast follower’s to undercut the market leader. Or perhaps the first mover looks like they have left money on the table, enabling fast followers to start with higher prices without having to deal with customers who object to price increases.
  • What’s the USP (unique selling proposition) for customers? Fast followers can observe the market and see if the pioneers had an effective USP or if that prize is still up for grabs.

You see that the list of advantages for fast followers is longer than that for first movers. But don’t be fooled by the number of bullet points. Analyze your market and your customers’ behavior. Typically it is large, established companies like Apple and Microsoft that are the fast followers. The bigger the company the slower they tend to move, and they are typically risk-averse. This is why startups often defeat large companies with more resources. As Kris Kristofferson sang, “If you ain’t got nothin’, you got nothin’ to lose.”

Whether you chose to be a first mover or a fast follower, be aware of the advantages you may have, but also the disadvantages and make the trade-offs strategically. Too many startups just assume they need to be first movers, only to establish a market that bigger companies then enter with more resources and market power. And whatever you do, if you are successful you will have imitators. You need to build a sustainable competitive advantage, such as patents or exclusive distribution agreements. While there can only be one first mover, there can be dozens of fast followers!

Author: Mentorphile

Mentor, coach, and advisor to entrepreneurs, small businesses, and non-profit organizations. General manager with significant experience in both for-profit and non-profit organizations. Focus on media and information. On founding team of four venture-backed companies. Currently Chairman of Popsleuth, Inc., maker of the Endorfyn app for keeping fans updated on new stuff from their favorite artists.

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