Some interesting insight I thought I’d pass on from a happy hour discussion with my Micro Economics professor, which may prove useful. While many people associate being a first mover in an industry as having a major advantage, that may not be the case. It seems often we associate the well-known or most successful brand with being first where as many of the highly successful companies that get credit for being first movers are actually the companies that refine a technology or build on it after another company chased down all the dead ends necessary to find out what does and does not work without a defined market. It is often then the company that understands the technology being developed as well as the market that can successfully put in place the business strategy to capture the market.
A couple prominent examples: While Frauenhofer developed the first MP3 player, it was unsuccessful, and then even though Advanced Multimedia Products came out with the first successful mp3 player, most people associate Apple with the mp3 player given the huge success of the iPod and often mistakenly believe that Apple was the first mover. Who invented the first desktop operating system? Not Microsoft – it was actually Digital Research that developed the first desktop operating system called CP/M, but Microsoft beat Digital Research out for inclusion on IBM’s personal computer and the rest is history. For that matter, Microsoft’s hugely successful history is full of second and third mover advantage.
That being said being the first to blaze a path into new territory does provide for advantages such as defining industry standards, guiding technological development, and the potential to hedge out other entrants based on economies of scale; however, it does not guarantee success. This leads to a couple take aways. If you are a first mover, make sure that you focus as much on a market strategy as on the technology under development and take measures early on to allow yourself to retain as much of the market that you have developed. However, if you are not the first mover in a promising field, do not be discouraged – there is a good chance that the first mover has broken the ground for you and with a clever market strategy and a better defined customer need, there is still a whole lot of returns waiting for you.
CEO, BlueVortex, LLC