Fistr Mover Advantage Presentation

First slide

Do you know which companies launched the first commercial versions of: • Personal computer, • Word processing software, • Web browser, and • Internet search engine • Today, none of them is the market leader in those categories or even anywhere near the top - despite the fact that all these products were introduced just 15 to 30 years ago. 

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• First Movers vs Market Leaders • Personal Computer: – First Mover: Altair (1975) – Market Leader: Dell (2006)

• Word Processing Software: – First Mover: WordStar (1979) – Market Leader: Microsoft Word (2006)

• Web Browser: – First Mover: Mosaic (1992) – Market Leader: Microsoft Internet Explorer (2006)

• Internet Search Engine: – First Mover: Excite (1993) – Market Leader: Google (2006) 

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The founder of Intuit, Scott Cook, who says that they had the 47th mover advantage in their category ('personal finance' software) when they launched Quicken in 1984! That is, there were 46 other vendors selling personal finance software largely similar to Quicken in functionality.

What is first mover advantage It’s a firm’s ability to be better off than its competitors as a result of being first to market in a new product category Examples Sony in personal stereos Gillette in safety razors Xerox in fax machine (bad) eToys in Internet retailing (bad) 

What does it depend on? resources Luck Anything else? 

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How to achieve it? 1.Create technological edge over competitors by starting earlier 2.Get access to scarce assets: talent, key suppliers, location; 3.Building early customer base 4. Conditions were ignored 

Conditions 1.Pace of technology development Examples: Glass was invented in 3500 BC. By Middle Eastern artizans. But glass blowing started only 3000 years later; lead glass 1600 years later. Contrast – computer (changes every day) 1.Pace of market expansion Examples: Slow: automobiles and telephone -50 years to have 70 % household penetration Fast: VCR and cell phones – 20 years only

The likelihood of first-mover advantage

Calm waters Best conditions for a long lasting dominant position; Vacuum cleaner Make a graph about growth of consumption 1908 produced by Henry Hoover 1930 ONLY 5 % of household purchased To hoover Why: 1.Harder to differetiate from the first 

Market leads, technology follows Walkman-the personal stereo since 1979 Design was the same for 10 years! Market grew quickly: 40 Mil in sales for 10 years! Short-term advantage – without resources: Boston’s Elias Howe sewing machnines Long-term advantage - with 

Technology leads, market follows Short-lived advantage is unlikely: - Many years of flat sales - Operating losses - New competitors come in all the time 

Long-lived advantage is also unlikely Deep pocket and strong R&D! Possible! Because they can wait till technology stabilizes Ex. Sony’s digital camera 

Rough waters AT&T and Netscape Item becomes obsolete very quickly. Products are overtaken by new entrants that don’t have to care about maintaining older product lines. Lack of marketing reach and productin capacity to meet the demand Ex. Gaming console market, laptop market (Osborne 1 – 24 pounds. After – numerous models) 

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However Short-term advantage is possible IF form knows when to exit Long-term advantage is ALSO possible IF firm has strong brand name, VERY deep pocket (not a guarantee, however: IBM which introduced 1st hard drive in 50sfailed) Such as Intel. 

iPod? 2001 - launched 2003 – 70% digital music players market share 2004 – 82 % Threats: Dell and iPod mini 

To be or not to be? No Polaroid would fail anyway If benefits come only later after entrance 

So 1.Analyze environment 2.Assess your resources 3.Decide if advantage will be shortterm, long-term, immediate or delayed, or none 4.In order for a company to try and become a first-mover that company needs to figure out if the overall rewards outweigh the beginning/underlying risks