In today’s business environment many believe that in order to be successful and most profitable that they must be the “first mover”.
The first mover is the initial firm that paves the road for a new product or market. It is believed that the first movers lock in competition enabling them to squash future entrants. The first mover often has heavy brand recognition or even contracts which keep other firms on the outside looking in. Early movers have the ability to learn from their mistakes and correct problems before competition enters the market.Early movers can establish patents on their advancements making it very difficult for others to compete. Usually first mover’s marketing and advertising costs are very minimal.
This article disagrees with the notion that being the first mover is the most advantageous. Using statistics they prove that being the first mover is not always the best way to enter a market. Boulding and Christen believe that followers have many advantages over early movers. Followers can learn from the mistakes of early movers and avoid adaptations necessary to perfect a product.The risk of producing a product that has been widely accepted is much less than spending money to introduce something that may or may not be a success. They argue that followers often come up with more efficient processes than movers who won’t change from their old ways.
In a study of profitability, Boulding and Christen found that the ROI for first movers was slightly lower than that of followers. Over time, followers became more profitable than first movers.The study showed that it took approximately ten years for followers’ profitability to overcome the high revenue produced by the first mover. What are the essential points in this article? The essential point of this article is to prove that being a follower is not always a bad thing, and that the followers can still be very profitable. A firm should not eliminate opportunities that exist in established markets. There are many ways to optimize processes that can lead to cost savings and profit in an existing market.
The first mover is most certainly going to have dominance and more profitability initially; but over time, unless they adapt, the first mover will lose market share to those who can optimize processes and produce at a lower cost. The follower has a huge advantage by being able to learn from the mistakes made by first movers and can bypass some research and development costs. How can you apply what you learned to business? (Important- be sure to provide specific examples of how you could apply the ideas contained in the article to you own career, etc. )This article statistically proves that there are two ways to be profitable. The early mover has clear advantages; however, the follower can still be very successful. I don’t think the authors stress that one approach is better than the other; but that they both can be profitable.
Businesses must be able to recognize markets or products that could use improvement and be able to produce something that can pull some of an existing market share. I currently work in the electric utility industry where products and technology have been the same for decades.There are very few manufacturers who produce the products we use on a regular basis. The initial engineering, research, and patents of several of the products make it extremely difficult for competition to enter the market.
The first movers have really closed off the market until the last few years as technology has evolved. Reading articles like this make me more apt to listen to what new manufacturers are presenting. They very well may have come up with a new product that is far superior to the first movers’.This article also makes one stop and think about their own product or industry and wonder if they have trapped themselves into their old ways and could lose market share because they aren’t adapting to changes and technology.
I believe that followers are good for a market and create competition. Competition forces firms to refine their product in order to maintain their market share. Competition not only benefits the consumer, but also the producer. As new versions of products are created, it urges consumers to purchase more and be drawn to the next best thing.
