Investor InsightsStartup Insights

First Mover Disadvantages

For ages, we all have been hearing success stories of first movers.   We have heard people behind these successes saying “we were successful…” that ends with the most repeated phrase ” because we had first mover advantage”. If that is true, should late movers not enter  into business?

There is no typo error in the header of this post.  You read it right.  I am writing my thoughts about first mover disadvantage.
 
For ages, we all have been hearing success stories of first movers.   We have heard people behind these successes saying “we were successful…” that ends with the most repeated phrase ” because we had first mover advantage”. If that is true, should late movers not enter  into business?
 
I would like to bring in a paradigm –  is first mover bestowed with all gravity defying advantages? Are there no existence defying disadvantages of being a first mover?   Particularly in the entrepreneurial world, are entrepreneurs weighing both advantages and disadvantages and taking prudent calls?  A prudent call can either of shape up or ship out (read…voluntary exit) depending on the enormity of disadvantages.  We may not have accurate answers to all the entrepreneurial dilemmas of first mover disadvantages and call taking situations, but it may be worthwhile to ponder on the paradigm “first mover disadvantage”.
 
With all the high stake investments that VCs are betting on Uber, can we consciously say Uber is blessed with all the first mover advantages? The amount of time, money and resources spent on fighting regulations and legal battles all over the globe, the first mover disadvantages are far too many. Now let us assume Uber wins in all the jurisdictions and new venture-friendly regulations make it seamless for new players to on-board and gain a market share, who is more benefited is anybody’s guess.  It is not the first mover.  Late movers have the cake  and eat it too.  I am not for a minute saying late movers have advantages over first mover and promoting late mover as a strategy.  Instead, I am saying late movers have  better odds at focusing on their core business, benefit from unambiguous regulations and evolved technologies.   First mover disadvantages may be one of the threats to be considered in SWOT analysis by both the founders and investors.
 
That brings another dilemma. If an entrepreneur has an earth shattering idea that can change the world, can he afford to wait if there are too many first mover disadvantages?  What if someone else patents the idea and creates entry barriers?  Good question. Not hard to answer.  Experts can vouch that designs and utilities can be patented but not a particular business line.  Amazon’s one click check out is patented, but not online retailing.   Facebook’s “Like” button is patented, but not social media business.  So, a business landscape is open for anyone to enter and exit.   Concerns of entry barrier due to patenting for late movers can be laid to rest.
 
Another concern may come up.  What if first movers have captured the entire market and that guarantees failure of late movers? This underlying  assumption for this concern may be that first movers are inherently blessed with the advantage of capturing the market share easily.   It is not so.  We all know that Facebook is not the first mover into social media.  There were social media platforms before Facebook that are extinct now.  Gmail is not the first mover into email provider service.  Large email providers before Gmail are virtually non-existent or faded now.  Nothing stops late movers to come up with innovative products and create stir in the market.  Human spirit is inherently positive.  If people believe that the new product is good for them, benefits them by saving time, money, convenience, ease of use,  they will switch.  It may be little challenging, not impossible.
 
The smart way is to weigh both first mover advantages and disadvantages, considering the disadvantages, evaluate whether we will  be in the business if we jump in as a first mover and then defer  the move.  In the interim, work on creating enablers to dilute the disadvantages. 
 
I brought this paradigm to deter late mover entrepreneurs who may be hesitating to launch believing that all the low hanging fruits are taken away.
 
The fruits are as low as we aim to reach!
Show More

Related Articles

Close