The following six part blog will address the race to be the first to market by entrepreneurs. There’s a type of entrepreneur in the world who needs to be first at all costs. The person who is so anxious to get to the market ahead of his or her competitors that it’s damn the cost, short-cut the research, substitute wishful thinking for detailed analysis and take an apology vs. permission attitude when dealing with partners, employees and associates.
Why The Big Hurry?
In most cases it’s probably based on the mistaken belief that there’s a “First-Mover Advantage” to being a pioneer when entering any market. This belief is so strong that entrepreneurs and often their financial backers, substitute an adrenalin infused strategy for careful planning based on measurable analytics.
First-Mover Advantage – A Chaotic, Unsustainable And Terrible Mantra That Most Entrepreneurs Mistakenly Rush To Embrace
In a paper written by David Montgomery and Marvin Lieberman, two Stanford Business School professors in 1988, the phrase became so popular that it became the foundation for the outrageous amount of money investors were willing to invest in half-baked concepts promulgated by wishful dreamers during the dot-com era that eventually fueled the dot-com bubble, a bubble that was more like a dot-com explosion that burned money, destroyed jobs and turned dot-com dreams into dot-com nightmares.
And yet even after all that devastation, the one idea that survived and possibly thrived was the belief that being first to market was an accepted truism and except for one little misconception, gave a marketer an unquestioned strategic advantage… and that little misconception was the fact that the truism simply wasn’t true.
Remember those two authors mentioned above who wrote that famous paper in 1988, well in 1998 they wrote another paper, this time disclaiming the claim.
While venture capitalists were adopting and promoting the clever and memorable mantra of “Get big fast” the facts, those boring and annoying facts, seemed to suggest something entirely to the contrary.
First To Be Second (Or Third Or Ever Fourth)—Is a Measured, Safer And More Likely Path To Success
In a paper written almost 25 years ago by Peter Golder and Gerald Tellis that analyzed more than 500 brands in 50 categories, it was revealed that almost half of “Pioneers” failed. Further, those companies that were classified as “Followers” had a much greater long-term success rate… even though the average Follower they studied entered the market an average of 13 years after the Pioneer.
In fact, the difference in failure rates was substantial… 47% of Pioneers failed compared to only 8% of Followers.
What isn’t known but what I strongly suspect, is that the cost of failure for the Pioneers was probably magnitudes greater than the costs endured by the Followers.