Sony was a first mover in personal stereos. Emirates was a last mover in airlines. Which strategy has the advantage: first or last mover?
When I was a child, I was frequently admonished with the adage that “The early bird catches the worm”. I analysed this and one day responded to my teacher: “But doesn’t the early worm get eaten by the early bird?”
In the 1970s teachers were not enamoured of eight-year-olds talking back to them. Worse was if said eight-year-old eloquently blew apart a foundational aphorism that the adult world depended upon to mould young minds with. To my chagrin, when I turned 30 and even more now that I’m in my 40s, people continue to resent logic intruding into their personal reality.
First mover’s advantage
The adult version of the early bird saying is the now ubiquitous “first mover’s advantage”. The idea here is that if there are no competitors, then the first mover gets to grab an extremely large market share.
This might make sense if there are no challenges. If it was all “pro” and no “con”. But life is rarely like that. What’s more, people rarely consider why nobody else has moved first. It could be that nobody else has seen the opportunity. How likely is that?
In truth the first mover, more likely than not, is like the suicide soldier who clears a path through a minefield by running through it and detonating everything in his way. The more thoughtful movers, also known as competitors, will stand by watching the first mover and learning what works and what doesn’t.
The late movers then roll in with their unspent resources monetising opportunities and defusing challenges. They politely whisper a thank you to the first mover as they pass his broken, bleeding body at the end of the minefield. Consider that Microsoft came after the founders of an earlier, and technically better, operating system called CP/M. Or Google as a search engine came after AltaVista and Yahoo. Or Emirates airline came after pretty much everyone.
Last mover’s advantage
When it finally became clear that a first mover’s advantage was not such a strong advantage, it suddenly became fashionable to eschew moving first and embrace the “last mover’s advantage”.
Apart from the intellectual laziness of responding to a challenge to an idea by not only rejecting it outright but also taking the complete opposite position, it simply is patently not true and there is the question of what a last mover is.
In the patently-not-true category, Gillette dominated the safety razor market as a first mover and Sony dominated personal stereos, to the point that their brand name, Walkman, became synonymous with personal stereos.
To see what I mean about the definition of a last mover, consider that in the search engine example I give above, I presented the idea that Google was the last company to move into the search engine market. But really it is simply the last company that moved into the market and became the No 1 player. Could it be that Google wasn’t the last mover, but instead later movers failed and didn’t become famous? Ever heard of Bing?
Think about it, what last mover’s advantage implies is that no company can maintain a No 1 position in the market, as any company that comes after will topple it. That can’t be right, can it?
It’s just marketing
So what should we believe? None of it. Three words, be it “first mover’s advantage” or “last mover’s advantage,” simply cannot encapsulate any useful, valuable or actionable information. They are just three words created as an easy tagline to co-opt naive investors into making investment decisions.
Is there a lesson in all this? Possibly. If an entrepreneur tells you he has a first or last mover's advantage, then maybe his only value is a tagline. Then again, taglines can be a powerful influence on decision-makers.
To that end I hereby copyright the phrase “quantum mover’s advantage.”
Sabah Al Binali is an active investor and entrepreneurial leader with a track record of financing, building and growing companies in the Mena region. You can read more of his thoughts at al-binali.com.
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