A Complete Guide to First Mover Strategy

4 years ago

A first mover is a company that gains a competitive advantage by being the first to bring a new product or service to the market. The disadvantages of first movers include the risk of products being copied or improved upon by the competition. Amazon and eBay are examples of companies that enjoy first-mover status.

What is First Mover Strategy?

The goal of a first mover is to become the dominant supplier in the industry by being the original inventor of the technology, product, or service offering. But not every attempt to be first is successful. The Nook (from Barnes and Noble) and the BlackBerry are examples of first movers that failed because they were unable to maintain the lead in their respective industries.

The first mover can take three strategies:

A. Innovate Alongside the Competition

  1. Innovate first, and then stay ahead of the competition by constantly improving your product. If Apple comes out with a new, faster iPhone, improve upon it by having an even faster, or even better, phone.
  2. A successful strategy involves “me-too” improvements. By constantly improving your product, the product will stay ahead of the competition, but–just like the me-too car salesman–at a lower price. The first mover can enter a new market with a product as good as or better than the competition, and then improve upon it until it wins over the customers. The Amazon Kindle is a prime example of this strategy. The Kindle was the first e-reader on the market, but Amazon continually improved the product by adding features and lowering the price until it beat out its competition.

B. Innovate by Creating a New Market

  1. Create a new market instead of going after the existing one. Instead of competing against Barnes & Noble for the digital reading market, for example, Amazon created the market by selling e-books to begin with, and then also selling the Kindle, its e-book reader.
  2. A first mover that creates a new market is not threatened by competitors entering the market later. A first mover can create a new market and dominate it because the first mover has created the need or want for the product. This strategy won’t be as successful in a competitive industry (i.e. one where many companies produce similar products), but it is likely to be successful if there is no similar product available.

C. Innovate Before the Competition Does

  1. Innovate before the competition does, whether that means filing a patent for the product, or simply being the first company to announce a new product. This strategy involves a significant amount of risk because the company must have new and innovative technology, which is risky and expensive. It also involves a great deal of time and money to develop the product, which can be difficult because during that time period, the first mover is unable to generate revenue.
  2. If the product ends up being a success, the first mover will gain a competitive advantage because the first mover will already be dominant in the market.

A first mover doesn’t need to be first in the market, but must be the first to introduce the product into the market. The first mover that comes out with a product will most likely be the company that controls that market. The way to beat the competition is by constantly innovating in order to stay ahead of the competition.

First Mover Strategy and Your Business

Take a good look at your own business. Are you a first mover? Do you have products that keep you ahead of the competition? Is your company always innovating?

As a business owner, if you want to succeed, your goal should be to be the first mover. Learn from Amazon and Apple. They both constantly innovate and refine their products to be the first mover in their respective industries. By using the strategies outlined in this article, your business can be a first mover as well.

Disadvantages of Being a First Mover

Being a first mover has its disadvantages as well.

Loss of Control of the Market

A first mover gains market share when it introduces the product to the market. If the company fails to maintain its leadership position, it risks losing control of the market to the competition. Because a first mover has a significant investment in a specific technology, and because new technology tends to evolve quickly, a first mover may not be able to follow the trend and keep up with the competition.

The Competitive Advantage of a First Mover

If a company is the first in the market, it will likely have a competitive advantage over the competition. The need for the product, and lack of competition, will lead to a period of growth for the first mover. However, the first mover must have a product that is continually improved upon in order to keep it ahead of the competition. If a company introduces a product but does not have the resources to spend on marketing, developing, and improving the product, then the company is not a first mover, but instead a late comer. An example of the competitive advantages of a first mover can be seen with the Amazon Kindle. Amazon was the first company to sell e-books, and when it released its Kindle e-reader, it was the first e-reader on the market. By being the first in the market, Amazon was able to build a market for e-books. Amazon took advantage of the new e-reader market by improving its Kindle e-reader to have features that were not available in other e-readers at the time. Amazon’s Kindle was considered the most technologically advanced e-reader on the market at the time. A study done by Carnegie Mellon University Business School showed that “the first mover advantage was significant and very large for Amazon in the Kindle market and that Amazon’s first mover advantage in the Kindle market had grown since 2007.”

Innovation Stealers

There is always the danger that one of the company’s competitors will copy a first mover’s new product to compete with the original. It is difficult for any company to keep a new product secret, therefore it is possible that its competitors will get a hold of the design and plan to release a knock-off. Rumors about products coming out can hurt a company’s chances at becoming a first mover, as information about a new product will spread across the industry and may allow competitors to get a leg up on the first mover.

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