First mover disadvantage
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First mover disadvantage

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First-mover Disadvantage - why pioneers end up face down with arrows in their backs!

First-mover Disadvantage - why pioneers end up face down with arrows in their backs!

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First mover disadvantage First mover disadvantage Presentation Transcript

  • FIRST-MOVER DISADVANTAGE WHY PIONEERS END UP FACE DOWN WITH ARROWS IN THEIR BACKS
  • As an angel investor, I see loads of business plans that claim substantial competitive advantage by being the first mover
  • They claim… First to launch = marketplace winner
  • The reality is quite different
  • Despite urban myth, the reality is that for 98% of first movers…
  • first to market = first to fail
  • Why?
  • Actually, there is no market1
  • Actually, there is no market1 Here is a law of nature...
  • Actually, there is no market1 If there is money to be made in a market, within 24 hours, there will be 10 Chinese companies and 7 Indian companies fighting for a piece of it.
  • Actually, there is no market1 If you don’t see that happen
  • Actually, there is no market1 then there is no market
  • Actually, there is no market1 The reality is that most first movers are actually solutions in search of a market.
  • It’s too expensive to be first2
  • It’s too expensive to be first2 If you have a truly novel solution, you will have to: • Make customers aware, convince them to try something brand new, and then teach them how to use it
  • It’s too expensive to be first2 If you have a truly novel solution, you will have to: • Make customers aware, convince them to try something brand new, and then teach them how to use it Ka-Ching
  • It’s too expensive to be first2 If you have a truly novel solution, you will have to: • Make customers aware, convince them to try something brand new, and then teach them how to use it • Create totally new-to-the-market supply & distribution chains
  • It’s too expensive to be first2 If you have a truly novel solution, you will have to: • Make customers aware, convince them to try something brand new, and then teach them how to use it • Create totally new-to-the-market supply & distribution chains Ka-Ching
  • It’s too expensive to be first2 If you have a truly novel solution, you will have to: • Make customers aware, convince them to try something brand new, and then teach them how to use it • Create totally new-to-the-market supply & distribution chains • Teach your own team how to make & sell something new
  • It’s too expensive to be first2 If you have a truly novel solution, you will have to: • Make customers aware, convince them to try something brand new, and then teach them how to use it • Create totally new-to-the-market supply & distribution chains • Teach your own team how to make & sell something new Ka-Ching
  • It’s too expensive to be first2 If you have a truly novel solution, you will have to: • Make customers aware, convince them to try something brand new, and then teach them how to use it • Create totally new-to-the-market supply & distribution chains • Teach your own team how to make & sell something new • Work with relevant regulators to create a regulatory framework / standards
  • It’s too expensive to be first2 If you have a truly novel solution, you will have to: • Make customers aware, convince them to try something brand new, and then teach them how to use it • Create totally new-to-the-market supply & distribution chains • Teach your own team how to make & sell something new • Work with relevant regulators to create a regulatory framework / standards Ka-Ching
  • Version 1 is never right3
  • Version 1 is never right3 Nobody ever gets it right the first time
  • Version 1 is never right3 No matter how good your market research* is, all products, and especially new ones, must develop iteratively based on client & market feedback * as if any of you entrepreneurs actually did market research properly
  • Version 1 is never right3 Fast followers & late entrants enjoy all the free iterative learning, that happens while the first-mover is… • distracted by providing customer support • burning it’s brand due to quality issues & feature-need mismatch
  • Real innovators are rarely good business people 4
  • Real innovators are rarely good business people 4 Although there are, from time to time, rare exceptions
  • Real innovators are rarely good business people 4 an entrepreneurial team staffed for truly disruptive, ground-breaking innovation
  • Real innovators are rarely good business people 4 is rarely a team with the right skills to cross the chasm and scale up the steep slope of the product lifecycle
  • Real innovators are rarely good business people 4 So the first mover naively paves the way, but others jog down the path.
  • First-movers get locked in5
  • First-movers get locked in5 First movers tend to get locked in to an inertia because of the single-minded passion required to be a first-mover.
  • First-movers get locked in5 The lock-in happens in product platforms, branding, pricing strategies, value chain partners, or the specific requirements of lead customers, who supply cash flow at the start, but then dictate features.
  • First-movers get locked in5 Finally, cashflow and time management realities make it impossible to stay at the cutting edge and support Version 1
  • First-movers get locked in5 Whatever the case, as the market evolves, first-movers end up with the unsheddable weight of their own initial successes.
  • First-mover opportunities are hard to capture & require immediate action6
  • First-mover opportunities are hard to capture & require immediate action6 While first-movers have the opportunity to create barriers to entry, many of these protections (such as IP) are extremely weak, especially if the first-mover is a small company.
  • First-mover opportunities are hard to capture & require immediate action6 Similarly, as a newcomer, it is not often that a first-mover can lock-in raw materials, or suppliers, or distributors before it is too late. Value chain actors usually prefer to leave their options open in brand new markets.
  • First-mover opportunities are hard to capture & require immediate action6 The only realistic strategies I’ve seen is to design in switching costs. Sometimes, taking advantage of this opportunity works, but mostly, not.
  • So, at the end of the day, as an angel investor I remain extremely sceptical about any plan that relies on first-mover advantage
  • 1. Actually, there is no market 2. It’s too expensive to be first 3. Version 1 is never right 4. Real innovators are rarely good business people 5. First movers get locked in 6. First mover opportunities are hard to capture and require immediate action
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