I recently worked with a young entrepreneur who wanted to launch a new business. She was very excited about the concept and believed she had found a specific angle that nobody else had introduced yet and could exploit what she knew as "first mover advantage."
I was excited for her as well, but not for the same reasons.
First, without squashing her hopes, I had to point out that her idea was not as unique as she believed. In fact, it was not unique at all, and a few Google searches revealed services identical to hers by other aspiring entrepreneurs. Granted, these other "businesses" were hardly large and intimidating in the way of competition, but I could see the air let out of her sails, as the saying goes, just a bit.
I pointed out that she should not be discouraged. The fact that other businesses are already offering the same service means that there is proof of concept and at least some market demand.
I shifted our conversation from being a "first mover" to being a "successful copier," which I admit does not sound nearly as glamorous as the prior. In truth, I told her, countless companies have found success being a successful copier (otherwise known as "second mover advantage").
In fact, according to a 2014 article in KelloggInsight, first movers "were more successful than late movers in just 15 of 50 product categories."
More important, I pointed out that being a "first mover" with any business can often be a significant challenge to young and inexperienced entrepreneurs. Consider:
- First movers must deal with far more unknowns, given the idea is untested in the market.
- First movers have far less data to leverage for decisions making.
- First movers have fewer opportunities for collaborating with other professionals who might add value to the idea.
- First movers will have a more difficult time assembling a team that can execute, because more than likely there are few people available with the experience needed.
- First movers will often find it difficult to lead, as the business inevitably will hit bumps and meet hurdles that will require consistent adaptation and even deciding to pivot entirely.
Fred Wilson, co-founder of Union Square Ventures, a New York City-based venture capital firm well known for its early-stage investments in some of the most progressive (and "first mover") technology companies, believes "life gets harder, not easier, when you have established yourself as the market leader."
According to Wilson, in addition to sailing into the unknown, you also need to make significant investments in your products and team to stay relevant, which includes properly managing your balance sheet. Failing to do so could mean that you end up as one of those other memorable first movers that failed.
See, I can't think of any either.
In the end, first mover advantage is a great strategy to pursue, as long as you and your team are prepared to dive into the unknown and make the necessary investments in time and resources to make it successful.
Otherwise, it is a great strategy -- and can even be a competitive advantage -- to accept that you are not first and simply allow yourself to be a better second, or third, or so on.
What do you think? Have you had an experience introducing a new product or service to an industry? Share your thoughts with me at @PeterGasca.