Second Mover Advantage: The Difference Between First & Leader

Pioneers sometimes enjoy the glory of fame but always get to be the ones to make the mistakes others benefit from.

Pioneers. Inventors. Visionaries. Revolutionaries. We have many romanticized terms for people who explore uncharted territory, introduce paradigm shifts, or create whole new marketplaces. Our business culture worships first-movers. We praise speed to market. We believe that in order to dominate a market you need to define it, to create it, to be the de facto leader.

Yet this isn’t always so. In fact, market leadership doesn’t necessarily correlate with being the first in the space…

Who created the first commercial cell network? Verizon? AT&T? Nope.

The first fully automatic mobile phone system, called MTA (Mobile Telephone system A), was developed by Ericsson and commercially released in Sweden in 1956.

Who created the first touchscreen smartphone? Apple? Motorola? Samsung?

The first smartphone was called Simon; it was designed by IBM in 1992 and shown as a concept product that year at COMDEX, the computer industry trade show held in Las Vegas, Nevada. It was released to the public in 1993 and sold by BellSouth.

The Ericsson R380, released in 2000, was the first phone sold as a ‘smartphone’.The R380 had the usual PDA functions and the large touch screen was combined with an innovative flip so it could also be used as a normal phone.

Who was the first car manufacturer?

The first car manufacturers in the world were French: Panhard & Levassor (1889) and Peugeot (1891). By car manufacturer we mean builders of entire motor vehicles for sale and not just engine inventors who experimented with car design to test their engines -Daimler and Benz began as the latter before becoming full car manufacturers and made their early money by licensing their patents and selling their engines to car manufacturers.

Creator of the first mp3 player?

The world’s first mass-produced hardware MP3 player was Saehan’s MPMan, sold in Asia starting in the late spring of 1998. It was released in the United States as the Eiger Labs MPMan F10/F20 (two variants of the same device) in the summer of 1998, a few months before the Rio.

The first Web browser?

The first widely used web browser was NCSA Mosaic. The Mosaic programming team then created the first commercial web browser called Netscape Navigator, later renamed Communicator, then renamed back to just Netscape. The Netscape browser led in user share until Microsoft Internet Explorer took the lead in 1999 due to its distribution advantage.

The first social network?

Early social networking websites started in the form of generalized online communities such as The WELL (1985), Theglobe.com (1994), Geocities(1994) and Tripod.com (1995). These early communities focused on bringing people together to interact with each other through chat rooms, and share personal information and ideas around any topics via personal homepage publishing tools which was a precursor to the blogging phenomenon. Some communities took a different approach by simply having people link to each other via email addresses. These sites included Classmates.com (1995), focusing on ties with former school mates, and SixDegrees.com (1997), focusing on indirect ties.

…by now you get the idea – the brand’s we often consider the definer’s of a category in fact did not define it. Sometimes they came much, much later. The key takeaway is that many companies who actually are first in a market do not necessarily go on to be the leaders of that market. Sometimes they go unsung, like artists who are ‘before their time’ only to be immortalized not in the S&P or Nasdaq but on the pages of Wikipedia (where all of the above stats were found).

Thought about from another angle, an argument can be made that intentionally not being the first in a market has competitive advantages. Here are some:

Free consumer research.
What do people like? What do they dislike? What features do they use? What do they struggle with or ignore? Focus groups can be notoriously inaccurate. Prototypes have limited research use. But once someone spends the money to introduce, build, distribute and market a new product they create a huge, real-world testing environment for someone else to learn from without spending much money at all.

Rescue frustrated people by offering an alternative.
The trouble with being the first company in a new category is that you’re the target for all the inevitable frustrations some consumers will have. This makes rooms for the second company in to position itself as a solution to those frustrations. Al Ries and Jack Trout used to call this the Law of #2 and though they wrote about it decades ago, it still stands today.

Spend less marketing money.
When your product is first a category your company bears the burden of defining the category and educating people on how to use the product. This means investing significant money and resources. The next company in the marketplace doesn’t have to make that investment, all they have to do is talk to the frustrations and limitations set up by the first guy.

Finishing first by letting someone else go first.
No doubt being first in a category can have huge advantages. However, it doesn’t guarantee leadership and because it forces the pioneering company to show its cards before any would-be competitors have to, it can create some vulnerability.

Meanwhile, an observant company could sit on the sidelines for a little bit (timing this is of course important) and allow another business to essentially serve as a combination reconnaissance/mine sweeper – clearing the way of obstacles and allowing the market to provide the initial feedback. This knowledge in turn forms the backbone of the v2.0 product that the second company produces.

I am of course not the first person to have this idea. Bigger people than I have noted how the market often favors the businesses that come after the businesses that start a category.

That said, it often seems that in the rush of media hype and promising ‘new’ technologies – with the requisite yammering about how the object du jour will forever change everything – an occasional revisit to some of the timeless truths is warranted.

It’s easy to get caught up in the continual refrain that ‘we live in a whole new world with all new rules’. There is some truth to this. There are also decades of previous learning to be leveraged in addressing business challenges today.

Sometimes it pays to hang back, observe, take notes, and plan your strategy after the initial rush. Being a pioneer sounds great until you realize that while you makes the mistakes the people coming after you get to learn from them.

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2 thoughts on “Second Mover Advantage: The Difference Between First & Leader

  1. Pingback: Paradigm Drift – TV in the Internet Era « Cyncerely

  2. Pingback: Quantifying A Paradigm Shift « Cyncerely

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