Much has been said about the first-mover advantages that companies like Coca-Cola and eBay hold. By being the original entrants into their respective markets – cola and online auctions – the companies have long held a competitive advantage over the competition. In the case of Coca-Cola, that competitive advantage has spanned three centuries, topping the world’s soft drink market since its 1886 introduction.
In recent years, being the first mover has lost some of its lustre, with market share domination of first entrants lasting only a short while or sometimes never really existing at all. That being the case, should companies today even bother trying to be the first to the table? Can we declare the first-mover advantage officially dead?
How does the first-mover advantage work?
Gatorade is one example of the first-mover advantage done right. Its story is similar to that of Coca-Cola, and, interestingly, it’s part of the PepsiCo line today, the number one rival to The Coca-Cola Company. Invented in 1965 at the University of Florida after the school’s football coach approached a team of doctors in hopes of finding a solution to his squad’s summertime heat-related illnesses. The doctors found that a deficiency in carbohydrates and electrolytes was contributing to the athletes’ depletion on the field and soon the world’s first sports drink, Gatorade, was born. The name originates from the University of Florida’s athletic teams nickname: the Gators.
As the first mover theory goes, following the success of a first mover, competitors and imitators usually flood the market in an attempt to capitalize on the success of the original company. Though they may make significant strides in the market, the first mover’s head start allowed it to build enough brand loyalty and experience, making it the unwavering industry leader despite an onslaught of competition. Today, even with dozens of copiers, Gatorade remains the best-selling sports drink in the U.S. and contributes over 10% to PepsiCo’s valuation, says stock analysts at Trefis.
What caused the first-mover advantage to be less relevant today?
The weakening of the first-mover advantage in recent years has been caused by the same factors that have affected other areas of business strategy: the Internet, globalization, and rapidly changing consumer preferences.
The arrival of the Internet opened the door to a whole host of new business opportunities. However, this also meant fewer barriers to entry. Today, just about anyone can launch an online business on a shoestring budget. There’s no need to open a traditional brick-and-mortar store or spend significant dollars buying ad space. As a result, the gap between the first mover and subsequent entrants to the market has shrunk significantly.
The same can be said about globalization. Fewer trade barriers and a greater interchange of ideas, services, and products between nations has heightened business competition. Again, the time between the first mover introducing its product to the world and subsequent imitators launching their own versions has shortened. As such, first movers have less time to build brand awareness and customer loyalty.
The fast-paced world of today has also contributed to the waning of the first-mover advantage. Though Blackberry was the first smartphone to achieve mass adoption in North American, it accounts for only 1.5% of the smartphone market share today. The company’s inability to keep up with rapid shifts in consumer tastes gave way for Apple and Samsung to take over the market.
So, is the first-mover advantage dead?
Not entirely. Though in previous decades being first to the table just about assured a company’s long-term success, today it’s hardly a guarantee. However, by being a first-mover and by remaining on top of market conditions and consumer trends, a company in this day and age has a much better shot of being a dominant force over many years. Airbnb is an excellent example of this. A pioneer in the sharing economy space, the company has managed to grow year-over-year by not getting complacent and keeping in tune with the needs of the marketplace.
The first-mover advantage is not dead; it’s simply no longer a suitable standalone strategy.