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The first mover advantage explained and dispelled - Mike The Biz Guy

The first mover advantage explained and dispelled

Hey business owners,

How are you all on this fine day?

Have you ever heard of something called the first mover advantage?

The first mover advantage is something that comes from conventional wisdom. It describes the competitive advantage gained by a company that enters the marketplace first and establishes its position.

Sounds great, right?

When we think about those companies that entered the marketplace early on and maintained their advantage, companies like Gillette and Coca-Cola, it makes us feel like if we could just get in there first, we would be invincible.

This is not true. Sorry.

Conventional thinking would dictate that a first mover advantage is just that – an advantage

Sadly, when we look at the market the data shows us that the first mover advantage is more myth than fact.

Did Apple create the first smartphone? No, IBM did,

Did Microsoft make the first personal computer? No, the Kenbak Corporation did.

Was Facebook the first rendition of social media? Not even close, that would be (possibly?) Friendster.

In reality first movers may have some advantage in the beginning but most of the time someone else comes along and saves themselves a fortune on R&D by improving upon the originator.

Very few companies have maintained their first mover advantage and those that have come from a time when there was no social media and Internet so they have had ample time to solidify their position.

How many other companies like Gillette exist now? And, more importantly, how much of their advantage comes from being first and how much comes from their decision making in the ‘right now’?

However, as a counter point to what we have just gone through there are some situations when pioneering is truly an advantage:

* When the product category is likely to have a short life (I.e. a fad or fashion product)

*When the cost of imitation exceeds the cost of pioneering. For example, if there would be patents involved etc.

*When the value of the product is extremely subjective or is in some way intangible

The thing about looking at advantages and disadvantages in business is that whatever way you look at it you are always focused on individual aspects of the ecosystem rather than the ecosystem in its entirety.

First Mover Advantage

Written By Mike on 27.07.2020