![]() Yet these firms cannot be used to justify the superiority of a first mover strategy as they are exceptions to a general rule. ![]() The most notable examples of first movers who have not only survived, but thrived, are Amazon and eBay. Fast followers Apple and Samsung did this much better by focusing on incorporating touch screens, cameras and internet connectivity in their mobile phones. One can infer a general principle from this - first movers tend to have a limited understanding of their customers, optimal business model and potential of their product, as seemed to be the case with Overture.Īnother example is Motorola, the pioneer of the mobile phone the company failed to make sound judgements concerning where they could push their technology and how to meet customer desires. It was learning from a first mover in this way that Google could monetise their search engine without compromising its functionality and attract a wide pool of users and customers. Moreover, they replaced Overture’s standard auction model with a Vickrey auction model, which saved winners from overpaying. Google observed and adapted this practice by adding a quality score to ads to discourage the use of off-topic keywords. Overture came up with the concept of “cost-per-click” web search advertising but found that their customers would bid up irrelevant keywords when it was used. Google’s revolutionary paid search model, to this day a large revenue generator for the company, was actually taken from a company called Overture. Google provides an example of a successful fast following strategy. One of the world’s most successful organisations was a fast-follower. ![]() And the first movers that do survive capture only 7% of their market on average. First mover businesses have a 47% failure rate compared to the 8% failure rate faced by fast followers. Yet the perception that being a first mover is a robust strategy continued to be perpetuated by those in Silicon Valley in order to justify recklessly funding new ventures during the dot-com boom.īut the idea of a first-mover advantage is simply not supported on an empirical basis. Lieberman and Montgomery themselves were more vocal of such first mover disadvantages in a paper they published a decade later, highlighting that the real world didn’t always live up to their original theory. ![]() Fast followers can make use of the groundwork first movers laid and instead divert their resources to the actual production and distribution of the product. The marketing point is especially relevant for unprecedented products one needs to spend significant time and money to educate the market about what some new good or service is, and why they need it. Savings can also arise from piggy-backing on the first mover’s research and development and marketing spending. Theoretically, this should translate into greater eventual market share. The listed advantages often take time to achieve, so a fast follower that learns from the first mover’s mistakes in realising these advantages can often do so before them, and at a lower cost. While this is certainly a valid argument, it is still largely applicable to fast followers. They argued that first movers could gain a market advantage by obtaining patents, gaining early control of scarce assets, and building a brand and economies of scale that makes it difficult for new entrants to usurp them. The concept of first mover advantage originated from academics Marvin Lieberman and David Montgomery. While there have been some instances where “first movers” have performed well, both empirical and anecdotal evidence suggest that being a “fast follower” is the optimal strategy for a firm in most instances. Others contend that it is better to let another firm make the first (mis)steps but to nevertheless be an early market participant. Some believe that it is better (as defined by firm longevity, market share and profitability) to be the first to bring this innovation to consumers. Whenever there is innovation, companies try to convert it into marketable products or processes. ![]()
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