The myth of ‘first-mover advantage’
We often see startup pitches mentioning the phrase ‘first-mover advantage’. Entrepreneurs sometimes also confuse their focus on a particular niche as a first-mover advantage.
The phrase ‘first-mover advantage’ is meant to convey that being the first company in the market gives you a lead which increases the chances of success. And it may well give you a little bit of a lead time before others catch up. But the advantage of being a first-mover is possible only if there are barriers to entry thus leading to a competitive advantage. And even if there are barriers to entry, it is usually so only in the short run.
Competitive advantage is when it is not easy for others to replicate what you have, thus giving you a true lead over them. For example, technology, especially IP, deep domain experience or relationships with potential customers, all give you an in-market advantage no matter how soon others start after you.
Often entrepreneurs also assume a differentiated feature to be a first-mover advantage. It could well be, but need not necessarily be so. I often illustrate the above point with the following example. Assuming that you start a fast food business with a differentiated offering of square idlis or idlis in smiley shapes (Or pancakes for non-Indian audiences). Idlis are usually round. So indeed your square idlis are different. And if you launch them before anyone else, you would definitely be a first-mover. But the idli being square or smiley shaped has neither any additional value for the consumer nor does it give you any protection or lead time as others can replicate square or smiley idlis too.
Defensible competitive differentiators — first-mover or otherwise — are aspects which are unique to you and which will be hard for others to replicate. Else, you are just a first-mover without any particular advantage or defensibility.
By Prajakt Raut — Managing Partner Supply Chain Labs — A sector-agnostic fellowship fund investing in startups disrupting supply chain, and Founder applyifi .
