The Other First-Mover Advantage

In business the first-mover advantage is obvious but it is not foolproof. As one analyst wrote, “First-mover advantage is no absolute guarantee of success, and for reasons which must remain forever mysterious, late-arriving and sometimes inferior products often take over the market from the first-movers.”

I don’t agree that the reasons “must remain forever mysterious.” I think some first-movers fail because they focus on the external benefits of being first to market and ignore, or even negate, the internal benefits.

How to transform “fishing” into “catching”
First-mover advantage begins not with a unique product but with a unique idea. Successfully transforming that idea into a product and then bringing that product to market requires a foundational team that can execute a vision. Along the way those founders experience trial and error that provides invaluable insights. For the company to retain its first-mover advantage, the team must learn to pass their knowledge on to new members as the company progresses through the A-B-Cs of funding rounds.

It’s like a fishing expedition. The founders venture out in a boat on a virgin lake. They cast a lot of lines. Most of those casts come up empty. A few yield a boatload of fish. 

It’s critical that the founders document the few areas of the lake that produce a lot of fish versus the many that do not. They have to map all the navigational hazards they encounter. They need to note the prevailing winds and the time of day that fish are most active. They need to warn of areas that look inviting but pose too high a risk — a stretch of lily pads, for instance, under a low canopy of tree branches. Cast there and you’re liable to not just come up empty but also snag your line in the attempt.

Being the first to explore the lake would give the founders an obvious advantage over any competitors who followed. The founders would also be well positioned to parlay that advantage into dominance as they expanded their fleet — but only if the founders effectively communicated everything they had learned to the new arrivals.

Keep the lines of communication open 24/7
While this concept seems obvious when you frame it as a fishing analogy, it often gets obscured in the complex, real-world rush of building a startup.

The challenge begins as soon as the company expands beyond the core group of founders into separate departments. A certain amount of isolation is inevitable at that point. That’s why it’s critical to have department heads who are true team players. They need to share their expertise companywide and not focus exclusively on their own domain — or worse, descend into internecine battles over territory or control.

One of my CEOs had a great saying that he plastered all over his company: “Communicate relevant market information.”

That company mantra was posted in every conference room, every hall, every walkway. Employees took it to heart, sharing whatever intelligence they could. For example, sales people in the field passed along information about cuts at other companies in the space that would otherwise have been invisible. At another company, the sales force might have regarded that news as nothing more than idle gossip and never thought to share it. But if you were an executive at a growing startup that was fighting to retain a first-mover advantage, think how valuable that information would be.

Sit down! Be humble!
Maybe the greatest challenge of all for the foundational members of a successful first-mover startup is the willingness to not only share what they’ve learned with new team members but also to learn from those new members.

To reprise the fishing analogy: Maybe a recent hire knows of a new high-strength line that is also cheaper than what you’ve been using. Maybe another recent hire understands sophisticated water-quality tests that could provide an early warning of an existential threat. 

Useful inputs can add high definition to the founders’ original vision.

In the end, probably the best way to keep your first-mover advantage is to guard against hubris. Remember, the only reason you got a first-mover advantage to begin with is that you happened to be lucky enough to think of your unique idea before someone else did.