Does the Second Mouse get the Cheese?

 In Articles, Business

First Mover Advantage has become a bit of a marketing mantra, a bit of a truism – but is it true?  Well, the answer – like many things in communications – is that it all depends.

The first mover advantage theory goes something like this; a company which is the first into a new market gets rewarded with huge brand dominance, massive profits, and a position in the marketplace which is virtually unassailable; one which competitors, or other new entrants to that market, find it almost impossible with which to compete.  Typically, first mover advantage is said to apply when a company is seeking to develop new geographical or demographic markets, new market segments for existing products, new products within existing market segments or – as is increasingly common in an online world –  is seeking to create an entirely new market altogether.

When competition comes along – as it inevitably will – the argument is that the first-mover will have so many advantages that they can beat off rivals like swotting flies.   Well, that’s the theory anyway, but there is a contradictory argument called – not surprisingly – Second Mover Advantage.

This theory says, somewhat counter intuitively, that the second mover into a market can gain massive advantages.  For example, they can learn from both the achievements and mistakes of the first mover.  Also, a first mover often has to make significant investments in R&D to develop a new product or service, but a second mover can avoid these costs by simply copying what the first mover has done. In addition, a first mover is inevitably on a learning curve about a new product or service, but a second mover can simply short circuit that learning curve by observing the first mover’s strategy and tactics, and drawing the obvious conclusions.

Finally, if successful, the first mover will have gone some way to educating the consumer about a new product or service; so that when the second mover comes along there is a ready-made market.  Summing it all up, the second mover can do anything the first mover has done, but quicker, at lower cost, and often do it better.

So what’s best?  Can we say that being first always delivers a significant and sustainable competitive advantage? It pays to look at some real life examples.

Atari was first into the games market, and for a time had a huge lead, but has been superseded by Nintendo. The first online book retailer was BookStacks (books.com) which was launched online in 1992.  Amazon only came along in 1994 – and we know what happened – world domination.  VisiCalc, was the first desktop spreadsheet program, but it didn’t stand a chance when Lotus came along with 1-2-3, and arguably Lotus has lost its market-leading position to Microsoft‘s Excel, which was launched later.  Microsoft is in itself an interesting example of when it’s not a good idea to be first.  Microsoft wasn’t first to market with an Internet browser; that honour probably goes to Netscape, which had a brief moment in the sunshine before Microsoft’s Explorer became almost universal.  A much more dramatic example of just how difficult it is to maintain a first mover advantage is MySpace which at one time was truly dominant but – in a world when everyone is on Facebook, where is Myspace now?  Staying with the big boys; Google wasn’t the first search engine by any means, others such as Yahoo had a good start on them, and while Yahoo is still around and fighting bravely, few people would doubt that Google resigns supreme. When someone wants to find out something they don’t say . . .  “I’ll just Yahoo that”.  Google has become synonymous with search, just as in the last century Hoover become synonymous with vacuuming.   

It seems that there is a strong case for being second, but let’s not forget that not every second mover succeeds; in fact most don’t.  There have been thousands of  second movers in every market, yet there can only be one market leader in each sector.  What’s happening?  What makes a market leader, especially one which starts second?  There might be clue in one crucial insight which everyone in marketing knows about, but which they sometimes forget.  In 1989, Arie de Geus’s made the now famous statement . . . “In the future, a company’s only sustainable competitive advantage may be its ability to learn faster than its competitors.”

Arguably, that’s what the likes of Facebook and Google, have done. Yes, they have reaped all the benefits of second mover advantage, but that alone wouldn’t have been enough to ensure their success.  They, and others like them, have risen to market dominance because they learned faster and better anyone else.  Both companies would classify themselves as “learning and adapative companies” they devote huge amounts of effort to staying on or ahead of the curve when it comes to both technology and customer needs.  That’s something worth taking into account next time you are thinking of investing in a second mover start up!

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