First To Market is a Failing Strategy?


I have speculated many times on this blog that first to market isn't really a competitive advantage. I didn't have any evidence to back that up except my general observations. I dug into the research and the most interesting paper I found was First to Market: First to Fail? by Tellis and Golder.

The study doesn't directly correlate to the web world because it looked primarily at consumer goods, but the ideas in it make sense, and the match my observations of web companies. Some interesting points from the study:

  • The failure rate of market pioneers is 47%.
  • The mean market share of pioneers is 10%
  • Market pioneers are current leaders in only 11% of categories.
  • The class of firms labeled "early leaders," that enter the market after the pioneers, has a minimal failure rate and an average market share almost three times that of market pioneers.

If first to market doesn't matter, what does? According to the paper, the primary factors are the ability to envision the mass market for the product and managerial and financial persistence. The authors tell a story about Apple as an example of financial persistence. I will repeat it here even though I'm sure it will break the hearts of some aspiring boostrappers.

While contemporary reports attribute Apple's success to the role of Steven Jobs and Stephen Wozniak, its success may be due as much to a largely unrecognized third partner, Mike Markkula. He was a former executive of Fairchild and Intel who became wealthy from stock options earned at those companies. When Jobs and Wozniak each invested $6,000 in their new venture, Markkula contributed $91,000 for a one-third interest. Markkula helped Apple receive a bank line of credit and venture capital from various sources, including a fund financed by the Rockefeller family. The strong financial backing enabled the firm to continue developing new products and quickly expand its market nationally.

(As a side note to the "corporate jobs are for stupid drones" crowd – note that Markkula was a marketing manager who made millions and retired at 32 without being an entrepreneur.)

The key point to take from all this is that first to market doesn't matter. It isn't a bad thing, it's just an irrelevant thing. It also doesn't say that speed is a bad thing and you can lollygag around and nitpick until you get perfection. Keep it in context by thinking about it this way – a one lap head start in a twenty lap race doesn't help if you aren't already a pretty good runner.