Working in the startup economy, I’ve gotten used to hearing friends and clients agonize over the first mover advantage they just lost because someone launched a similar product just a few months before theirs was due to market. Being the first to enter the market might give you a head start, but does it necessarily guarantee you unchallenged market leader status?
A paper by Golder and Tellis in 1993 was the first to document that 47% of first movers are seen to fail. Whereas 92% of fast followers that took control of a product’s market share after the first movers pioneered them, have had long term success.
The idea has been repeatedly endorsed by noted entrepreneurs of our time including Shane Snow and Ryan Holmes. The latter has gone so far as to say that the first mover advantage has today turned into a first mover liability, because fast followers simply co-adopts your product capabilities by not only bringing the same into their products, but significantly improving upon it. (Remember Snapchat’s disappearing stories? Oh yea, now Facebook and Instagram and even Watsapp has it too!)
By riding the second wave, fast followers have the distinct advantage of customer and market validation and are able to address the gaps in early solutions. The most successful products out there are not the ones that have tons of features and went to market first. Counter intuitive as it may seem, lean products that address just a few key pain points have consistently seen wider acceptance. This takes lateral thinking and a conscious shift to the “less is more” side of the table.
The fast follower advantage is further supported by the law of Diffusion of Innovation first popularized by Everett Rogers in 1962, which talks about how a new idea needs to spread over time through a social system, before it can reach a point where the rate of adoption can peak. In his theory, Rogers outlines that only 15% of the customer population are early adopters of a new idea, while the vast majority of over 70% will warm up to a new innovation significantly later.
By this principle, fast followers have an increased chance for self-sustained success, simply because by the time they roll out their product, the market is ready for it.
The fast follower advantage and theory of diffusion of innovation is probably best seen in this great tech example –
In 1998 Goto.com (later Overture) was the first to create the pay per click search engine and advertising platform. The company never hit mainstream success and was eventually acquired by Yahoo for $1.6 billion.
It was much later, in the year 2000 that Google came out with it’s version of the pay per click advertising. Adwords was hugely successful and is today one of major contributors to making Google a $25 billion dollar company.
Digital ad spend in 1998 when Goto.com launched was a mere $157 million, as opposed to the $8 billion digital ad spend market that Adwords tapped into in the late 2000.
Adwords having the fast follower advantage was able to hit the market when it was more ready to adopt the innovation. Seems like an obvious way to ensure success doesn’t it?
If you’ve got a brilliant idea, but others have already made headway, remember that it’s still too early to pull back the troops, and this might just be the right time to get started!
Chairman,3E IT Solutions
Original Article available at Linkedin