First Mover Advantage – Fact or Fiction?

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.

~Sascha Calkins
  CEO, BlueVortex, LLC

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4 Responses to First Mover Advantage – Fact or Fiction?

  1. Sascha,
    In some sense, there are two basic choices. One is to build or create new systems, products, or services and the other is to look for those opportunities with current technologies along with other types of serve needs. Although, I may suggest that the primary key or advantage is the creativity of creating or using what is needed. This leads into the idea of ‘black swans’ and scalability (see Nassim Nicholas Taleb for this type of discussion). Never knowing where success may be (although planning and doing the work helps) then are we left with being the right place at the right time conditions?

    • BlueVortex says:

      Hi William,

      I think it often can be being in the right place at the right time, but I think it is also consistently taking the actions necessary to be in the right place so that when the right time comes along, you are there to benefit from it. Chance may favor the bold but it also favors the prepared.

      Thanks,
      Sascha

  2. Jim Jenal says:

    Sascha –
    There is another key advantage for the first mover – intellectual property rights! Although first movers do not always succeed in securing those rights, if they do, they will be in the enviable position of letting someone else sweat the details of bringing the product to market while they sit back and collect royalties (and work on their next great idea!)
    At the end of the day it is far more important for a cutting edge technology company to focus on securing its IP than it is to worry about marketing!
    (Just my 2 cents from a recovering IP lawyer!)
    Cheers…
    Jim

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