First Mover Disadvantage

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FIRST-MOVER DISADVANTAGE why pioneers end up face down with arrows in their backs

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As an angel investor, I see loads of business plans that claim substantial competitive advantage by being the first mover

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They claim… First to launch = marketplace winner

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The reality is quite different

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Despite urban myth, the reality is that for 98% of first movers…

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first to market = first to fail

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Why?

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Actually, there is no market 1

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Actually, there is no market 1 Here is a law of nature...

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Actually, there is no market 1 If there is money to be made in a market, within 24 hours, there will be 10 Chinese companies and 7 Indian companies fighting for a piece of it.

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Actually, there is no market 1 If you don’t see that happen

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Actually, there is no market 1 then there is no market

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Actually, there is no market 1 The reality is that most first movers are actually solutions in search of a market .

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It’s too expensive to be first 2

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It’s too expensive to be first 2 If you have a truly novel solution, you will have to: Make customers aware, convince them to try something brand new, and then teach them how to use it

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It’s too expensive to be first 2 If you have a truly novel solution, you will have to: Make customers aware, convince them to try something brand new, and then teach them how to use it Ka-Ching

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It’s too expensive to be first 2 If you have a truly novel solution, you will have to: Make customers aware, convince them to try something brand new, and then teach them how to use it Create totally new-to-the-market supply & distribution chains

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It’s too expensive to be first 2 If you have a truly novel solution, you will have to: Make customers aware, convince them to try something brand new, and then teach them how to use it Create totally new-to-the-market supply & distribution chains Ka-Ching

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It’s too expensive to be first 2 If you have a truly novel solution, you will have to: Make customers aware, convince them to try something brand new, and then teach them how to use it Create totally new-to-the-market supply & distribution chains Teach your own team how to make & sell something new

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It’s too expensive to be first 2 If you have a truly novel solution, you will have to: Make customers aware, convince them to try something brand new, and then teach them how to use it Create totally new-to-the-market supply & distribution chains Teach your own team how to make & sell something new Ka-Ching

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It’s too expensive to be first 2 If you have a truly novel solution, you will have to: Make customers aware, convince them to try something brand new, and then teach them how to use it Create totally new-to-the-market supply & distribution chains Teach your own team how to make & sell something new Work with relevant regulators to create a regulatory framework / standards

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It’s too expensive to be first 2 If you have a truly novel solution, you will have to: Make customers aware, convince them to try something brand new, and then teach them how to use it Create totally new-to-the-market supply & distribution chains Teach your own team how to make & sell something new Work with relevant regulators to create a regulatory framework / standards Ka-Ching

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Version 1 is never right 3

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Version 1 is never right 3 Nobody ever gets it right the first time

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Version 1 is never right 3 No matter how good your market research* is, all products, and especially new ones, must develop iteratively based on client & market feedback * as if any of you entrepreneurs actually did market research properly

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Version 1 is never right 3 Fast followers & late entrants enjoy all the free iterative learning, that happens while the first-mover is… distracted by providing customer support burning it’s brand due to quality issues & feature-need mismatch

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Real innovators are rarely good business people 4

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Real innovators are rarely good business people 4 Although there are, from time to time, rare exceptions

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Real innovators are rarely good business people 4 an entrepreneurial team staffed for truly disruptive, ground-breaking innovation

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Real innovators are rarely good business people 4 is rarely a team with the right skills to cross the chasm and scale up the steep slope of the product lifecycle

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Real innovators are rarely good business people 4 So the first mover naively paves the way, but others jog down the path.

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First-movers get locked in 5

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First-movers get locked in 5 First movers tend to get locked in to an inertia because of the single-minded passion required to be a first-mover.

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First-movers get locked in 5 The lock-in happens in product platforms, branding, pricing strategies, value chain partners, or the specific requirements of lead customers, who supply cash flow at the start, but then dictate features.

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First-movers get locked in 5 Finally, cashflow and time management realities make it impossible to stay at the cutting edge and support Version 1

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First-movers get locked in 5 Whatever the case, as the market evolves, first-movers end up with the unsheddable weight of their own initial successes.

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First-mover opportunities are hard to capture & require immediate action 6

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First-mover opportunities are hard to capture & require immediate action 6 While first-movers have the opportunity to create barriers to entry, many of these protections (such as IP) are extremely weak, especially if the first-mover is a small company.

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First-mover opportunities are hard to capture & require immediate action 6 Similarly, as a newcomer, it is not often that a first-mover can lock-in raw materials, or suppliers, or distributors before it is too late. Value chain actors usually prefer to leave their options open in brand new markets.

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First-mover opportunities are hard to capture & require immediate action 6 The only realistic strategies I’ve seen is to design in switching costs. Sometimes , taking advantage of this opportunity works, but mostly, not.

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So, at the end of the day, as an angel investor I remain extremely sceptical about any plan that relies on first-mover advantage

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Actually, there is no market It’s too expensive to be first Version 1 is never right Real innovators are rarely good business people First movers get locked in First mover opportunities are hard to capture and require immediate action

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