In Race to Market, It Pays to Be Latecomer
In the tech world, the first ones to market often have to spend much of their time and money educating the general public. Nobody other than techies saw the use for the personal computer in the late ’70s. It wasn’t until spreadsheets and word processors came along and people started seeing them used at work that PCs started to gain traction.
And techies themselves often see where the market is going, but have to go through several iterations before they get a concept right. Just look at online retailing. ~Milton
Contrary to popular belief, being the first to market rarely pays off, a new research paper concludes.
“If you have an idea for a new market, it’s extremely hard to pull off,” says Mr. Dobrev.
He and Mr. Gotsopoulos researched the life spans of 2,197 automobile companies that launched in the U.S. between 1885 and 1981. None of the initial 25 lasted for more than 15 years, and today there are just three dominant players in the U.S. auto industry—General Motors Co., Ford Motor Co. and Chrysler Group LLC. The professors’ findings were published in the October edition of the Academy of Management Journal.
Several modern examples also illustrate the consequences of being among the first—if not the very first—to penetrate an untapped market. Take Netscape, the now-defunct Web browser that preceded Internet Explorer, Safari, Firefox and Chrome.
And while social-networking innovators the Well, Friendster and MySpace still exist today, none match the popularity or financial prowess of their successor, Facebook.
If you’re unfamiliar with some of these, you’re not alone. Once so-called first movers disappear, they’re often quickly forgotten, says Mr. Dobrev. “You rarely hear about first movers who failed,” he explains. “They don’t exist very long. They don’t leave a lot of records.”
Salescoop LLC’s Scoop St., a daily deal website, launched in October 2009, about a year after rival Groupon Inc. took off, and nearly a decade after online discounter Goldstar debuted. In building Scoop St., co-founder David Ambrose says he and his partner, Justin Tsang, benefited by observing the competitive landscape prior to launching.
Attempting to make history can backfire on a young company, adds Mr. Barchas. “A colloquial way of looking at this is being the first soldier on the lip of the trench. It’s a glorious and noble position, but it’s also dangerous.”