First mover advantage is commonly cited as being a strategic opportunity. This is largely because by being the first company to bring a new concept to market you will have a unique opportunity to create barriers. However, being the first mover also has several key disadvantages that first movers should be aware of and try to manage.

First, when a company brings a new concept to market, it faces a unique challenge: it must educate its customers about the new product or service. This situation poses a significant risk since would-be customer response to products cannot always be predicted, especially when perceived switching costs are high. Additionally, education can be a costly process, resulting in first movers having sales and marketing costs significantly in excess of later entrants.

Second, the issue of having to educate market participants also holds true for partners and suppliers. Other parts of the supply chain need to not only understand how the new product works and its value, but also they need to have enough faith in your vision to adapt their business.

Third, first movers often make costly mistakes that enable later entrants to penetrate the market. The internet search market is a classic example of this error. Yahoo! and many of the other search players treated search technology as a loss leader – a service designed to attract users to their revenue bearing services. As a result, they invested little in developing their search technology. This strategy provided Google with the opportunity to differentiate itself.

Make no mistake, pioneering a new space brings with it both great opportunity and great risk. While a first mover can't fully eliminate these challenges, being aware of them can help them improve its odds.

Comments

[Nate Westheimer]

This certainly is one of the biggest fears of innovating. We can be confident that we're "right" about where things need to go, but by arriving first, we must ask if we're shooting ourselves in the leg.

But it's just one of those things you buck up and deal with. Consumer education is tough, but I'd rather be on the innovation end of things any day of the week.

[Artov Noyce]

The cost of consumer education and brand awareness can be mitigated via strategic application of discount-priced traditional media. Of course, the communication must be architected to be both entertaining and compelling, and the media is best purchased by an agency that offers air time scheduling (in the case of TV) without adding traditional "fees." Essentially, these cheap tv spots can also serve to displace later entrants into the First Mover's market -- competitors will be intimidated by the First Mover's apparent broad media saturation, and will have a tougher time shifting consumers away from the First Mover's brand. At present there are three companies providing advertising in the low-cost TV ad market: Spotrunner, CheapTVSpots.com and Spotzer. Other inexpensive, yet effective traditional media choices can be employed to educate the market, such as local radio (at smaller stations), and articles or ads in trade, business and consumer print publications. The challenges of pioneering new markets can be overcome fairly easily with creativity, perseverance and fearlessness. Our effort to educate consumers should protect revenue by choosing financially efficient promotional methods, but should also help to create (perceived) barriers for later entrants, keeping competitive pressures at bay while we grow our companies. You also have to have a damn solid product.

[Yu-kai Chou]

Thanks for the post! I do believe that I am onto something pretty big, and, if done correctly, it will be society changing. However, our company will be close to first to market.
In the future, a better tool of recruitment would be necessary in a world of globalization and talent shortages and virtual worlds is actually a great tool to do many things more conveniently and efficiently. Although many still have concerns whether or not people people would accept the transition of combing a platform of escapism to the use of productivity, but when I conceptualized it 7 months ago it was crazy, and now it is understandable. I believe in the future, it will become something obvious. However, it does take the market time to catch on.

One of the only major players in this new, if you would call it, industry is http://unisfair.com. They are backed by Sequoia, and hosts paid virtual conferences and trade shows. I don't see it as a big threat because it is more like facebook-flickr difference as it has different goals and target market(and our tech guy says the technology is not difficult in compete with). Plus, they would be very useful to introduce the industry into the world and get people familiar with the idea. I tend to believe that second to entry(if moving fast enough) is more ideal, as long as the team is strong in adapting and also has enough cash to keep it alive until the market catches up.

Your post is very relevant to what I believe is our market position. Thanks for the time and effort!