First mover disadvantage

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

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First mover disadvantage

  1. FIRST-MOVER DISADVANTAGE WHY PIONEERS END UP FACE DOWN WITH ARROWS IN THEIR BACKS
  2. As an angel investor, I see loads of business plans that claim substantial competitive advantage by being the first mover
  3. They claim… First to launch = marketplace winner
  4. The reality is quite different
  5. Despite urban myth, the reality is that for 98% of first movers…
  6. first to market = first to fail
  7. Why?
  8. Actually, there is no market1
  9. Actually, there is no market1 Here is a law of nature...
  10. 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.
  11. Actually, there is no market1 If you don’t see that happen
  12. Actually, there is no market1 then there is no market
  13. Actually, there is no market1 The reality is that most first movers are actually solutions in search of a market.
  14. It’s too expensive to be first2
  15. 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
  16. 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
  17. 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
  18. 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
  19. 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
  20. 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
  21. 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
  22. 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
  23. Version 1 is never right3
  24. Version 1 is never right3 Nobody ever gets it right the first time
  25. 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
  26. 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
  27. Real innovators are rarely good business people 4
  28. Real innovators are rarely good business people 4 Although there are, from time to time, rare exceptions
  29. Real innovators are rarely good business people 4 an entrepreneurial team staffed for truly disruptive, ground-breaking innovation
  30. 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
  31. Real innovators are rarely good business people 4 So the first mover naively paves the way, but others jog down the path.
  32. First-movers get locked in5
  33. 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.
  34. 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.
  35. First-movers get locked in5 Finally, cashflow and time management realities make it impossible to stay at the cutting edge and support Version 1
  36. 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.
  37. First-mover opportunities are hard to capture & require immediate action6
  38. 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.
  39. 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.
  40. 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.
  41. So, at the end of the day, as an angel investor I remain extremely sceptical about any plan that relies on first-mover advantage
  42. 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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