A few people have told me that pitching the “first mover advantage” for a startup isn’t always the best thing. Being first doesn’t guarantee success. If anything, being first is fraught with more peril; since you don’t have anyone to copy or compare to. And, depending on how innovative your product offering, you might be too early for VCs to get it too, making raising money even harder. Often, when a space heats up, after the first few companies have gone in and made their mark, is when you’ll see even more money pour into it.
Don Dodge just posted a reprint of an article he wrote a few years ago: First Mover vs. Fast Follower – Who Wins?
The article is just as relevant today (if not more so). Startups are launching faster than ever and require less capital than they used to — at least in the Web 2.0 world — and that means more opportunity for first movers, but even more opportunity for fast followers. And I think we’ll look at the next 5 years or so in the Web 2.0 world as the “me too” years; when fast followers took over from the first movers in a whole bunch of areas.
The benefit for “me too” companies, or “copycats” is that they get to learn from the mistakes made by the first movers. First movers tend to have trouble innovating as quickly – they’re dealing with problems, customers, etc. They’re burning through more money than the copycats. So fast followers can simply move more quickly, and benefit from the first mover’s lessons.
This doesn’t mean I want to see a million more “me too” companies. In fact, I typically yawn when I see new stuff come out that looks so similar to its predecessors — and therein lies the problem for copycats. Learning from other companies’ mistakes isn’t enough. Copying almost exactly what others have done isn’t enough. Even “just a little twist” on something old won’t sustain you for long, although it might get you some good press, and early adopter uptake. Followers can only succeed if they’re innovative. That’s easier said than done — especially if you’re focused almost entirely on comparing yourself to the first mover startup — and you lose sight of what makes you unique, and you lose your ability (if you had it at all) to innovate.
Followers can correct the mistakes of leaders because they already know what to watch out for. In Don Dodge’s article he uses a number of examples of first movers that failed versus fast followers, and attributes the failure, in part, to bad management decisions made by the original companies. Copycat startups have the opportunity to implement better management and make better choices. But Dodge also points to the fact that his example fast followers were also innovators:
They have continued to innovate far beyond the original idea or feature set and have maintained market leadership. If you look closely at these companies they have a mix of technical visionaries and business management leaders.
For copycat startups, it’s critical to have more well-rounded businesses – combining innovative technology and good business management. First movers can capture the hearts and minds of an audience with their technology alone – they’re first in the space, defining it and grabbing bucketloads of attention – but followers need to think more seriously about how to tackle the market, leveraging marketing, PR, social media, etc. alongside their technology.
Ultimately, whether you’re first or not doesn’t seem to determine your chances of success. If anything, you may have more chance of success if you’re not the first mover, so don’t focus on rushing out foolishly. And don’t throw in the towel if you’re not first to market … there’s plenty of room to hit a home run.