There isn’t a universally “correct” answer to “How to compete? Be first or be better.”
Both strategies have their merits and drawbacks, and the optimal approach often depends on a multitude of factors specific to the industry, product/service, market, and company resources.
Here’s a breakdown of each strategy:
A. Be First (First-Mover Advantage)
Being the first to introduce a new product, service, or business model to a market.
Potential Advantages:
- Temporary Monopoly: For a period, you might be the only player, allowing you to capture significant market share without direct competition.
- Brand Recognition and Loyalty: Early entry can lead to strong brand recognition and customer loyalty as you become synonymous with the new offering. Think of Coca-Cola or Kleenex.
- Customer Lock-in/Switching Costs: If your product involves a learning curve or integrates deeply into a customer’s workflow, switching to a competitor can become costly or inconvenient.
- Network Effects: For platforms or social products, being first can establish a critical mass of users, making the product more valuable as more people join (e.g., Facebook, WhatsApp).
- Control over Resources/Standards: You might secure exclusive supplier agreements, patents, or set industry standards, creating barriers to entry for later competitors.
- Economies of Scale: Early market dominance can allow you to achieve economies of scale faster, leading to lower production costs.
Potential Disadvantages/Risks:
- Pioneer Costs: You bear the burden of educating the market, developing infrastructure, and resolving unforeseen technical or market challenges.
- Market Uncertainty: You’re operating in an unknown territory. The market might not be ready for your offering, or your initial product might miss the mark.
- High R&D Costs: Significant investment in research and development is often required.
- Risk of Failure: Many first-movers fail because they either run out of resources, misjudge the market, or are simply overtaken by more agile followers.
- “Fast Follower” Advantage: Competitors can learn from your mistakes, refine your concept, and potentially launch a superior product more efficiently and at a lower cost.
When “Being First” is Potentially Stronger:
- Highly innovative, disruptive products.
- Markets with strong network effects.
- Industries where intellectual property (patents) can create significant barriers.
- Situations where establishing a dominant standard is crucial.
B. Be Better (Fast Follower/Differentiated Strategy)
Entering an existing market with a superior product, service, or customer experience.
Potential Advantages:
- Learn from Pioneer’s Mistakes: You can observe what works and what doesn’t for the first-mover, avoiding their costly errors in R&D, marketing, and product design.
- Reduced Market Education Costs: The first-mover has already educated the market about the new product category.
- Refined Product/Service: You can improve upon the initial offering, addressing customer pain points or adding features that the pioneer missed.
- Leverage Existing Infrastructure: You might be able to use existing supply chains, distribution channels, or technological platforms.
- Lower R&D Costs: You don’t have to invent the wheel; you can focus on optimization and differentiation.
- Clearer Market Signals: You have more data on market demand and customer preferences.
Potential Disadvantages/Risks:
- Brand Recognition Gap: The first-mover might have established strong brand loyalty, making it harder to attract customers.
- Customer Switching Costs: If the first-mover has high switching costs, it can be difficult to lure customers away.
- Market Saturation: The market might already be crowded or saturated by the time you enter.
- No Obvious Differentiator: If you can’t genuinely be “better” in a meaningful way, you’ll struggle to compete.
- Price Pressure: You might have to compete on price to gain market share, eroding margins.
When “Being Better” is Potentially Stronger:
- Mature markets with established players.
- Industries where customer experience or specific feature sets are highly valued.
- When you have a clear, sustainable competitive advantage in terms of quality, cost, speed, or innovation.
- If you can identify significant gaps or weaknesses in existing offerings.
The Synergistic Approach
Often, the most successful strategy involves elements of both:
- Be First in a Niche, then Be Better Broadly: Identify an underserved niche, be the first to serve it well, and then leverage that success to expand and be better in a wider market.
- Iterative Innovation: Be first with a Minimum Viable Product (MVP), then continuously iterate and improve to stay better than emerging competitors. This is common in tech startups.
- Strategic Acquisition: A fast follower might acquire a struggling first-mover for their technology or market share.
Key Questions to Ask Yourself:
- What is the nature of the innovation? Is it truly disruptive or an incremental improvement?
- What are the market dynamics? Is it a new, emerging market or a mature one?
- What are your resources and capabilities? Do you have the R&D budget for pioneering, or are you better equipped for optimization?
- What are the barriers to entry for competitors? Can you create defensible advantages (patents, network effects, economies of scale)?
- What do customers truly value? Is it novelty, reliability, cost, or specific features?
In conclusion, neither “be first” nor “be better” is inherently superior. The most effective competitive strategy depends on a careful assessment of your unique circumstances and a deep understanding of the market you aim to conquer.
