Thursday, April 8, 2010



The global business acumen is populated with a multitude of mildewed and hollow adages that fail to equip companies with knowledge to reap extraordinary benefits; First Movers’ Advantage is one such hogwash. Over decades, there have been entrepreneurs who have been washed away by this cliché, that once promised them a blue ocean. And most often than not, they ended up wasting truckloads of dollars in inventing the next unimaginable business bet, and building the platform for the late coming slumber-jacks, who eventually walked away with all the goods – the revenues, the profits, and in most cases, even the innovator’s future!

Henry Ford, who himself was a first mover (having pioneered the automobile), had once proclaimed, “I believe that the best strategy for the first per son is to be second!” He was right. Today, Ford Motor Company, his brainchild has not only slipped from being the world leader in automobiles, which it was some decades back (Toyota, GM & Volkswagen with respective market shares of 13.7%, 12.2% & 9.5% are the top three as per the December 2009 World Motor Vehicle Production OICA Survey), but has also become the champion of automobile recalls, globally! If you thought that the $16.4 million fine imposed on the late-mover Toyota Motor Co. by the US government, following its monstrous recall of 8 million vehicles since January 2010 was a fair punishment, how much would you recommend for the first mover Ford, which in 2008 recalled 14.1 million vehicles, after recalling 8 million in 1996?

What’s common between Vivola, Erwise, Midas and Mosaic? All four, individually claimed that they created the browser market. Their hard work translated into a business idea for late-mover Bill Gates. As of February 2010, Microsoft’s Internet Explorer commanded a 65% control over the global browser market (data by Janco Associates Inc.).

Being the first to stake a claim on a new territory doesn’t ensure sustainability. Sadly, it doesn’t even guarantee advantages as was originally believed. Take the case of the lesser known Prodigy Communications. It was an early bird in the business of online connections, which it entered in 1984, along with huge brand names to guarantee it success: there was IBM leading technology for its operations, Sears Roebuck heading its online retail and CBS was roped in for news coverage and selling of ad-space. Twelve years later, it was sold to a private investor group for just $250 million. Similar was the case with the Graphical User Interface, which was developed by the Xerox Corporation at their Palo Alto Research Center (PARC) in the 1970s. Steve Jobs, co-founder of Apple Computers, visited PARC in 1979 and was impressed by the Xerox Alto, the first computer with a graphical user interface feature. He offered Xerox a chance to invest $1 million in Apple pre-IPO stock, in lieu of two visits to PARC with his engineers. Today, none remember that the Xerox Alto was the first computer with a GUI; for the world, it is the Apple Lisa, which simply “copied” the technology which Jobs saw at Xerox. It’s interesting how one man can prove the case for the late movers so well. Steve Jobs didn’t invent the portable music player, or the first laptop, or even the first smartphone. He only followed, and followed right! His iPod, iMac, iPhone have become bestsellers.

There are many examples of how the first mover lot has been one which has been long forgotten. Names like King Kullen Grocery Inc. (which pioneered supermarkets in America in 1884), Minnetonka (which produced the world’s first liquid soap), Ampex (maker of the first VCRs, which lived for just two decades), Chux (from J&J, which was the first disposable diaper brand), Micro Instrumentation & Telemetry Systems (which pioneered personal computing with the Altair), Visicalc (the first desktop spreadsheet program), Atari (which brought to market the first video game), Dumont (which led the way in selling television sets), and many more, have been relegated to the dust-laden history books. And to talk about the new age champions, they are all those which learnt from the mistakes of the early birds.

Walmart was not the pioneer of retail. Excel was not the first spreadsheet to hit desktops. Commercial aircraft were not the brainchild of Boeing or Airbus. Neither did Disney start a theme-based park, nor was Starbucks the first to sell gourmet coffee. It’s true: they were not the first, they had learnt well and did better!

The criticism is supported well by research too. Researchers DavidMontgomery (Stanford University) and Marvin Lieberman (University of California), in their paper titled ‘First Mover Advantages...’ stated that the ability “to ‘free ride’ on first-mover investments and resolution of technological and market uncertainty” comes as an advantage to second movers.

“Pioneers often miss the best opportunities, which are obscured by technological and market uncertainties. In effect, early entrants may acquire the ‘wrong’ resources, which prove to be of limited value as the market evolves,” added the duo. And to talk about numbers, the fi nal nail is hammered in by Richard B. McKenzie of the University of California, who proved through an extensive study how failure rates across traditional industries for pioneers, was a 71%, with their lot controlling just a pathetic average market share of 6%.

A research by professors Markus Christen (INSEAD) and William Boulding (Duke University) also testifies thus, “We found that pioneers in consumer goods had an ROI of 3.78% lower than later entrants. And the ROI of first movers was 4.24% lower than followers in the industrial goods sector. Bottomline: Pioneers were substantially less profitable than followers over the long run…

Once upon a time, long long ago in Bethlehem, the wise men said that competition was like a 100 meter race – the first off the blocks is the one who has the biggest chance of winning the race. What they unfortunately forgot was that competition was more like a 40 kilometer marathon, where it matters more how well would you last the whole distance and learn from the mistakes of those ahead of you. Imagine driving a car at 120 miles an hour on a completely pitch dark highway in the middle of the night. Now, wouldn’t you give a king’s ransom to have another car ahead of you tasting the bumps and ditches first?



  1. A very insightful article. Almost felt like acquiring an entire books worth of knowledge. What i take away from this finally is, its not enough to be first but to also strive to be the best. First doesn't necessarily mean the best. The last line of your post is the most simple and effective way to explain what you have written in your article. Thanks for the wonderful post!

  2. A great article to get to know about Second Movers aren't worse. If follow the strategy of First mover, follow d best, and learn from the First's Mistakes to capture the best of the best.

    Thanks for the post!!

  3. Excellent Blog Sandeep ji .
    First movers are not necessarily always loosers :)
    There's an other side too.
    The loosers part is pretty interesting and reflects the real industry insights .
    Good work.
    Kurien Joseph !

  4. Sir,I thoroughly enjoyed sitting at one of your seminars where you discussed about First Mover advantage and it was interesting to read this editorial too. If Management Gurus like you start propagating that first movers mostly fail, who would take the lead to invent & innovate and bring great products to the market ha ha.

    what should be a company's strategy to stay and lead when it is the first mover in the market?