Xerox’s photocopiers. GE’s electric light bulb. These are famous examples of the “first mover advantage,” in which companies or brands are able to retain a dominant position in the market largely due to the fact that their innovation was a first of its kind.
In their 1987 research paper, Marvin Lieberman and David Montgomery of Stanford Business School discuss three basic reasons for the first mover advantage:
- Technological advantage – Patents, unique understanding of the learning curve, or other proprietary R&D.
- Preemption of assets – Access to critical assets required for production.
- Buyer switching costs – Monetary or non-monetary inhibitors that discourage buyers from changing from one brand to another.
Each of these reasons can provide a formidable barrier for competitors trying to break into a new category or industry.
Nevertheless, we have seen many examples of brands overcoming such obstacles to unseat first movers, and in some cases make them completely irrelevant. Apple was not the first to offer a portable music device, a mobile phone, or even a smart phone, yet it has created dominant market positions versus brands such as Diamond Rio (who? early MP3 player) and Blackberry.
Apple has found itself on the other end of this story as well. Its Newton, launched in 1993, was an early “personal digital assistant” which was eclipsed by the introduction of the Palm Pilot. Similarly, Atari was a first mover in video games, but it was overtaken by Nintendo and Sony.
So how do brands overcome the first mover advantage and truly succeed in a new category? Lieberman and Montgomery’s paper discusses some of the reasons for this possibility, including:
- First mover inertia – Early brands become overly committed to a specific technology, set of assets, or organizational structure.
- Superior insights – New brands demonstrate a better understanding of the customer’s needs.
This second point is a key to breaking through the first mover advantage. Perhaps the most powerful competitive advantage a brand can have is the ability to leverage true insights better than its competitors.
We offer these points to challenge brand owners about how they position their brands for future success based upon better customer insights:
- Create a culture of curiosity – Ask everyone who works with your brand to finish the sentence, “I wish I knew…” This simple exercise will quickly identify critical knowledge gaps. By making it a priority to fill these gaps, you can gain insights about your customers’ needs that you might never have thought about—and likely neither have your competitors.
- Revisit your brand’s promise – What does your brand promise to its customers? Is it clearly understood by customers? Is it unique? Does your brand consistently deliver? Use your knowledge of customers’ needs to make a unique and relevant promise to your customers that you and you alone can fulfill.
- Go beyond the current confines of the category – What are the needs that your customers are really trying to meet? Thinking beyond the category in which your brand competes can open up opportunities for brand growth and delight your customers beyond anything they imagined.
So, whether you’re a first mover or someone who has come to the party late, focusing on customer insights and leveraging them aggressively can help you become the life of the party.
Please contact us for more information.