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

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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