Why there is no advantage to the first-mover advantage

Business schools all over the world teach us about the first-mover advantage and the benefits of being first to market with a particular product or service. We learn how that advantage leads to all the riches we could ever imagine, monopoly-like status, and market domination.

This is simply not true. There is no advantage to being a first-mover. Maybe I should even coin a new term, “first-mover disadvantage.”

This seems counterintuitive. Of course there should be advantages to being first to market with a product. However, other than some pharmaceutical products, where having a patent and being first to market means years of domination (but you are the ONLY mover in that case, not even the first-mover), there is a dearth of evidence to support the theory of first-mover advantage.

Apple didn’t invent the tablet, Microsoft did. Yet Apple has more than a 50% market share.

General Motors didn’t invent the first affordable car, Ford did. Yet GM has almost 20% of the North American market share.

Google didn’t invent search engine technology, WebCrawler did. Yet Google controls almost two-thirds of the search engine market.

Intel didn’t invent the computer microchip, Texas Instruments did. Yet Intel is the top producer in the world of computer microchips.

These companies didn’t support the idea of first-mover advantage. In fact, they were happy to let someone else enter the market first and make all of the mistakes that first-movers make. They saw what worked and what didn’t and identified gaps and opportunities upon which they could capitalize.

So what makes these companies so good at negating the supposed first-mover advantage? Here are just a few reasons:

  • They see opportunities and gaps in the marketplace and are flexible enough to pounce on them.
  • They ensure those opportunities align with their core business strategy and organizational strengths.
  • They are able to find areas of competitive advantage (speed, quality, functionality, distribution, customer experience, etc.) and leverage them.
  • They have the discipline to effectively execute on their core business strategy and not be distracted by other opportunities.
  • They are able to create a unique experience that draws customers closer to them.
  • They are able to calibrate the speed at which they operate, knowing when to speed up and when to slow down.

Effective execution and pursuing operational excellence play a more important role than being first to market. The ability to leap over your competition is a much stronger advantage than how fast you get to market. When someone else is first to market, strong companies see how the market responds and make improvements to their offerings to create exponential growth and erect barriers between themselves and the competition.

Companies that are first movers expend a great deal of energy getting there first, while the competition waits patiently for their opportunity to strike.

Great race car drivers sometimes follow closely behind other drivers in the first few laps of a race to see the nuances of the course and the other drivers’ strategy. This is called drafting, and it saves energy and allows them to make up speed. Once they are comfortable, they can focus their effort on taking control of the race because they have seen where taking a sharp turn to quickly or passing too high on the track can lead to mistakes. They have also determined where the best places are to overtake the competition.

First-mover advantage is only an advantage if you are the first person in line when they are giving away free iPads, but not if you are the company that makes the iPads.

Perhaps your strategy to be first will only make you finish last.