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Does ‘first-mover advantage’ always work!!?

If you happen to be at a business school sometime in your lifetime, or an entrepreneur mentored by a seasoned businessmen who loves to talk, or just happen to take a course on market development, then you’ll be very familiar with the term ‘first-mover advantage’. In layman’s term it says that whoever moves first to a new market (or create a market) has the most advantage. Well, it sounds pretty obvious and I ‘used to’ firmly believe that too. However recently I’ve stumbled upon some interesting data which do indicate that that may not be the case always. At this point of analysis let us make few things clear:
  • The cost and effort invested in entering or creating the market will be gigantic!. How? Because you are putting everything together from scratch. You’ll have to carry out exhaustive (and mostly expensive) market research, plus first contact with the suppliers or distributors, and lastly advertising and branding.
  • Today’s market is no more a ‘need-driven’ market, It is more of a ‘value-driven’ market. It is not anymore about using a motor grinder over hand mincer, or using an age old razor blade which can kill you with just a slightly wrong twist over a safety razor; It is about how you product is valued by the consumer. Whether you can push him a 3D TV or whether he’ll love to have a voice-recognition power switch at home is the major thing to tackle.

Even in today’s world (iPhone was not the first smartphone), it is hard to imagine products that benefitted from first-mover advantage (Amazon AWS may become an exception one day).

I think, Prof. Eric Laithwaite captured this thought beautifully in his book: An inventor in the Garden of Eden when he explained why products also go through an evolution cycle as does other living beings.