It’s almost a matter of faith. It’s best to be first. There’s the first mover advantage, right? You get to market early, stake out the ground, and ride the market wave to riches and fame. Not so fast. Often the surest path to success is letting the first mover make all the mistakes and then jumping in with both feet at which point the first mover is often emotionally and financially drained.
Every industry is built on the bones of forgotten pioneers. In semiconductors, there was Fairchild. In personal computers there were Imsai, Altair, Vector Graphics, and Cromemco. In automobilies, do you remember the Pope and Duryea? In fact, it is relatively rare for the true first movers in an industry to survive the transition to the mainstream markets. Ford’s Model T, the first mass production car came almost twenty years after the first entrants. Perhaps one of the most striking examples of the benefits of being a “fast follower” is Dell. Compaq (now almost forgotten itself) was concerned about its positioning relative to IBM and DEC. It wanted to be respected and trusted. It did all the things that you were “supposed” to do including investing heavily in technology. Dell on the other hand spent almost nothing on R&D. Instead, it used off-the-shelf components based on the research investments of others and focused on doing a much better job of delivering computers that the mass market really wanted. It’s cost structure was much lower than Compaq’s in part because it wasn’t investing in pure research.
So why isn’t there more advantage to being first? The answer lies in the spread between how fast technology changes versus how slowly people change. There is only a first mover advantage in the rare situations where a new technology goes quickly from concept to eary adoption to Main Street. In that case, the first mover achieves advantages of scale and discourage others from coming into the segment–or make it really hard for them to succeed. Would you like to start a new auction site to go up against eBay? No, I didn’t think so. How about a search engine?
The more common scenario is one in which the first entrants educate the market, make all of the necessary mistakes and then run out of patience or cash. Their successful successors are the ones who carefully study what the market really wants and invests in sales and marketing as adoption takes off. The best example of this in many categories has been Microsoft. They have rarely innovated in the truest sense of the word. Instead they “embrace and extend” other’s ideas. Windows 3.0 followed the Macintosh by six years but is clearly the standard. Microsoft was late to networking. Late to desktop applications. And late to many other parties. Yet through the years, they have succeeded by good product management, great marketing and relentlessness. One of the rare places where this has not worked has been the internet. This is partly because Microsoft failed to do its usual good job of “fast following” and partly because the big winners (Google, eBay, Amazon) have taken off so quickly.
My advice (which I hope I am smart enough to take myself) is to resist the urge to rush into each new technology. Wait. Watch. Invest a little and wisely so that you learn. But save your real investments for when the adoption begins to accelerate. Being a smart second, can be a very profitable strategy.