Do you believe first mover advantage is a real thing?
I’ve been in first mover as well as follower companies and have some first-hand experience.
Being first to market may not be all it is cracked up to be and here are 4 reasons why.
Have you heard of first mover disadvantage?
It’s real.
Having spent time at pioneering companies as well as those that enter a market later (settlers), I have a first-hand perspective on this.
Reason #1: Premature Scaling
One study involving over 3,000 startups indicates that roughly 75% fail because of premature scaling. They made the mistake of making investments the market was not ready to support. They tried to run too far, too fast. This is a very real risk for pioneers.
Reason #2: Risk Seeking
Pioneers are risk takers by nature. One study indicates that entrepreneurs who rush into a hyped market are more prone to failure. Those who wait for the market to cool actually have higher odds of success. Pioneers by nature are working with incomplete market information. That can be a real disadvantage.
Reason #3: Arrows in the back
First movers have to make all their own mistakes. They have to “figure it out on the fly” with no established roadmap to guide them. Settlers can watch the early entrants and “borrow” their knowledge from the pioneers, avoiding some of their pitfalls. Mistakes can be costly in terms of time and money. Avoiding just a few can make all the difference.
Reason #4: Creating a market and all that comes with it
Pioneers can become captive to their early offerings. Initial products or services may not be as profitable as follow on offerings. Why? Additional products or services can take advantage of the initial offering’s hard -earned market knowledge. Second movers can observe market changes and respond accordingly.
Takeaways: One large study found a failure rate of 47% for first movers as opposed to an 8% failure rate for followers. Notably, even when the first movers did survive, they captured roughly 10% of the market share compared to 28% for followers.
First movers may get the glory, but second movers often get the profits. Think about that and decide which one you’d rather be.
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