First-mover and fast-follower or follower are important time-to-market based strategies.
The relationship between these strategies and new product success is complex, with many factors influencing the relationship between order of entry to a market and performance.
There are many examples of both the advantages and dis-advantages of each strategy.
Advantages of being a first-mover vary greatly and depend upon characteristics of both the market segment and the product.
In some circumstances a first-mover may be at a dis-advantage compared with later entrants or a durable first-mover advantage is very unlikely.
Advantages to early movers, as measured by market share or profit or survival, often exist.
However, there is substantial variation from case to case, indicating that early mover advantage is not inevitable: it depends on context and must be earned.
Early mover advantages have been found more often for market share than for profit or survival and is often found across a broad range of market types.
The potential to achieve early mover advantage depends upon characteristics of the market segment, the firm and the product.
It is difficult to attain or sustain an early mover advantage in markets that are changing rapidly with respect to technology or other factors.
Some studies find a first mover advantage due to network effects, while others find these effects are associated with first mover dis-advantages.
First mover advantage can depend on the technological readiness of suppliers, customers and/or other players in a firm’s ecosystem.
Even if market, firm and product characteristics favor early entry advantages, the success of any first mover strategy depends upon how well that strategy is implemented.
First Mover Product Design and Business Model Advantages
Early mover product design and business model advantages and opportunities shrink over time.
As the “First Mover Product Design and Business Model Advantages” graphic illustrates, a first mover has broad choices about relative performance and cost while entering late limits your performance and cost options.
In general, performance advantages, such as market share or profit, diminish over time.
The time to competitor entry into a new product market has decreased from 33 years early in the 20th Century to about 3½ years much later in the 20th Century and is continuing to decrease. This decrease in time to competitor entry is likely to decrease the size of any first mover advantages.
Value Matrix for Speed to Market
The importance of Intellectual Property in a Speed-to-Market initiative depends upon the company’s branding positioning in the Value Matrix.
Speed-to-Market Offers IP & Development Cost Protection
Brands that offer low performance service at a low price (think Virgin Airlines) are in the lower left quadrant of the Value Matrix.
These firms benefit most from avoiding Speed-to-Market initiatives by having lower development costs derived from being able to reverse engineer First Mover and Fast Follower work (shown as a blue line in the “Speed to Market Offers IP and Development Cost Protection” figure).
It is noted however that if a First Mover takes advantage of IP protection for its new products and services, then the development costs of Fast Followers and Laggards can be relatively increased rather than decreased).
Brands that offer high performance service at a high price (think Singapore Airlines) are in the upper right quadrant. These firms benefit most from Speed-to-Market initiatives by introducing desirable new services and in-flight features faster than their competition, thereby sustaining high product and service prices (shown as a blue line in the “Speed to Market Offers Market Share and Pricing Options” figure). These premium price points can be protected by acquisition of appropriate IP available to First Movers.
Brands that offer both relatively high performance service at a relatively low price (think United or Lufthansa Airlines) are in the upper left quadrant.
These firms benefit most from Speed-to-Market initiatives by gaining market share from their competitors via fast-following with new features and services ahead of industry laggards (shown as a gold line in the “Speed to Market Offers Market Share and Pricing Options” figure).
Use “R&D Game” Insights to Set Project Parameters to help you work out whether first-mover advantages are likely for your market segments and products.
Even if market, firm and product characteristics favor early entry advantages, the success of any first mover strategy depends upon how well that strategy is implemented.
Early mover product design and business model advantages and opportunities shrink over time.
As the graphic illustrates, a first mover has broad choices about relative performance and cost while entering late limits your performance and cost options. In general, performance advantages, such as market share or profit, diminish over time.
Use “R&D Game” Insights to Set Project Parameters to help you work out whether first-mover advantages are likely for your market segments and products.
Sources, References and Selected Bibliographic Information:
Marvin B. Lieberman and David B. Montgomery, Conundra and Progress: Research on Entry Order and Performance, Long Range Planning vol. 46, pages 312 – 324 (2013)
Fernando Suarez and Gianvito Lanzolla, The Half-Truth of First-Mover Advantage, Harvard Business Review, pages 121 – 127 (April, 20
