The question of whether to “be first into the market” (first-mover advantage) or “be better” (fast-follower advantage) is a classic strategic dilemma with valid arguments for both sides.
There’s no universally “correct” answer; the optimal approach depends heavily on the industry, the nature of the innovation, available resources, and market dynamics.
Here’s a breakdown of the pros and cons of each strategy:
Be First into the Market (First-Mover Advantage)
Pros:
- Early Market Share and Dominance: Being first allows you to capture a significant portion of the market before competitors arrive, potentially establishing a dominant position.
- Brand Recognition and Loyalty: Pioneers often become synonymous with the product or service, leading to strong brand recognition and customer loyalty. Think of Kleenex for tissues or Google for search.
- Higher Margins: With less competition initially, first movers often have the ability to charge higher prices, leading to better profit margins.
- Setting Industry Standards: You get to define what the product or service should be like, influencing consumer expectations and future industry developments.
- Control of Resources: First movers can secure the best suppliers, distribution channels, and even attract top talent before others.
- Intellectual Property: The opportunity to secure patents, copyrights, and trademarks can create barriers to entry for competitors.
- Switching Costs: If your product involves high switching costs for customers (e.g., software platforms, established networks), being first can lock in users.
Cons:
- High Costs: Significant investment in R&D, market education, and establishing production/distribution channels is typically required. You bear the cost of proving the market exists.
- Risk and Uncertainty: There’s no guarantee of market acceptance. You’re entering uncharted territory, and your initial product may not be fully optimized.
- Educating the Market: You have to spend time and resources educating potential customers about the new product or service, its benefits, and how to use it.
- Mistakes are Costly: Being first means you’re likely to make mistakes (in product design, marketing, etc.) that can be expensive to rectify. Fast followers can learn from these.
- Regulatory Hurdles: New innovations might face unforeseen regulatory or legal challenges.
- Complacency: Success as a first mover can sometimes lead to complacency, making it harder to adapt to changing market conditions or new technologies.
- Defense Fatigue: Constantly defending your position against new entrants can be draining and divert resources from further innovation.
Be Better (Fast-Follower Advantage)
Pros:
- Reduced Risk: You can observe the first mover’s successes and failures, reducing the risk of investing in unproven concepts.
- Lower Costs: Fast followers can leverage the groundwork laid by the first mover, avoiding high R&D and market education costs.
- Market Insight: By observing the market response, consumer feedback, and gaps in the initial offering, fast followers can tailor their products to meet customer needs more effectively.
- Improved Product: You have the opportunity to refine and enhance the product or service, addressing the first mover’s shortcomings and offering a superior solution. Think of Google’s search engine compared to earlier ones.
- Leveraging Existing Infrastructure: If the first mover has created a market or educated consumers, fast followers can capitalize on this existing awareness.
- Faster Time to Market (for improved version): While not the first to market with the concept, fast followers can often launch their improved version quicker than the original innovation took to develop.
- Adaptability: Fast followers can be more agile and responsive to evolving market trends and customer preferences.
Cons:
- Missed Opportunities: You might miss out on the initial “gold rush” and the potential for establishing unassailable market leadership and brand recognition.
- Need for Differentiation: Simply copying isn’t enough. Fast followers must genuinely offer something better to convince customers to switch or choose them over the established first mover.
- Catch-Up Strategy: You are always reacting to the first mover, which can be a constant challenge.
- Limited Control: Fast followers generally have less control over market dynamics and may be more reactive than proactive.
- Shrinking Window: In rapidly evolving industries, the “fast” in “fast follower” is increasingly critical. The window to capitalize on a first mover’s efforts can be very small.
- Brand Association: The first mover often sets the perception for the product category, and it can be hard for followers to break that association.
Conclusion
Ultimately, the best strategy depends on your specific circumstances:
- If you have substantial resources, a truly disruptive innovation, and a high tolerance for risk, being a first mover can lead to significant rewards and market dominance.
- If you have strong capabilities in product improvement, market analysis, and speed of execution, but perhaps fewer resources for groundbreaking R&D, being a fast follower can be a highly effective and less risky path to success.
Many successful companies have adopted both strategies at different times or in different product lines. Google, for example, was a fast follower in search (Overture was first), but a first mover in many other areas. Apple often allows others to pioneer categories before entering with a highly polished and user-friendly “better” product.
Consider the following questions when deciding:
- How truly innovative is your offering? Is it a completely new concept, or an improvement on an existing one?
- How quickly is the market likely to evolve?
- What are your financial and R&D capabilities?
- What is your risk tolerance?
- Can you genuinely offer a significantly better solution if you wait?
- How strong are your marketing and branding capabilities to cut through the noise if you’re not first?
The most successful companies often combine elements of both, recognizing that innovation is an ongoing process, and strategic flexibility is key.
