First mover advantage describes the benefits that a company will gain if it is the first competitor into a certain market or to launch a certain new product or service. It rocketed to popularity in the Internet “land-grab” years, when companies invested crazily to be the first into virgin e-territory, driving metrics like “cost per eyeball” and relying on the first mover advantage to create future profitability.
Strong network effects can be a major first mover advantage, which explains why e-Bay has never been able to catch up in Alibaba in China or Yahoo in Japan
However, as most of the Internet companies found out, first mover advantage is no substitute for a profitable business model. It is only sustainable where there are unique positions or assets that the company can lock-in – the best partners, the best shopping malls, patent protection, supplier exclusivity for example. Weaker competitive advantages based on the learning curve or brand awareness are unlikely to make a difference on their own. First mover advantage is biggest in markets with a slow rate of technology change and slow market growth.
Some very successful companies adopt a “Fast Follower” approach, whereby they wait to see how the pioneer does, then enter avoiding their mistakes before they have acquired unstoppable momentum
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