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The Myth of First Mover Advantage

The Myth of First Mover Advantage

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Published by Justin Pettit
White paper on First Mover Advantage (FMA).

Despite the recent Apple-Samsung verdict, Apple's greatest success has not been as a first mover. First-mover advantages can exist in certain conditions, but these conditions are increasingly rare, and the effects are increasingly short-lived. Furthermore, while there can be initial market share effects, these benefits often do not translate into economic gains – the costs of being a first mover often exceed the benefits, in economic terms. Finally, many companies are increasingly opting to compete and win in the marketplace, as followers. Followers are advantaged in many ways, and these advantages can serve to ensure greater economic success in terms of shareholder value and profitability.

This brings a new dimension to innovation strategies – timing. Companies that choose a first mover strategy tend to operate in industries with intensive knowledge exchange and try to leverage their advantaged absorptive capabilities. Companies that choose a follower strategy, compete through improved offerings, operational excellence, or innovative new formats. Follower strategies have also evolved to fit the characteristics of the product category – in new or unfamiliar product categories, follower strategies that enhance the offer by improving existing features enable followers to compete successfully with pioneers. In familiar or mature categories, follower strategies add new or unique features, or innovative formats, to aid differentiation. For example, at the time of writing, Burger King was test marketing home delivery in certain D.C. markets, with what could ultimately represent a disruptive, new format for an otherwise mature market.
White paper on First Mover Advantage (FMA).

Despite the recent Apple-Samsung verdict, Apple's greatest success has not been as a first mover. First-mover advantages can exist in certain conditions, but these conditions are increasingly rare, and the effects are increasingly short-lived. Furthermore, while there can be initial market share effects, these benefits often do not translate into economic gains – the costs of being a first mover often exceed the benefits, in economic terms. Finally, many companies are increasingly opting to compete and win in the marketplace, as followers. Followers are advantaged in many ways, and these advantages can serve to ensure greater economic success in terms of shareholder value and profitability.

This brings a new dimension to innovation strategies – timing. Companies that choose a first mover strategy tend to operate in industries with intensive knowledge exchange and try to leverage their advantaged absorptive capabilities. Companies that choose a follower strategy, compete through improved offerings, operational excellence, or innovative new formats. Follower strategies have also evolved to fit the characteristics of the product category – in new or unfamiliar product categories, follower strategies that enhance the offer by improving existing features enable followers to compete successfully with pioneers. In familiar or mature categories, follower strategies add new or unique features, or innovative formats, to aid differentiation. For example, at the time of writing, Burger King was test marketing home delivery in certain D.C. markets, with what could ultimately represent a disruptive, new format for an otherwise mature market.

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Categories:Types, Research
Published by: Justin Pettit on Jul 25, 2012
Copyright:Traditional Copyright: All rights reserved

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