GAINING EDGE 34 ー CONTEXT FOCUS Competitive advantage KEY DATES 1988 US scholars David Montgomery and Marvin Lieberman write "First-Mover Advantage " , outlining the competitive advantages 0f being first tO market. 1995 Amazon ℃ om launches, the first of a new breed of online retailers. 1997 ー 2000 Ad 叩 ting the "be first" mantra, dot.com businesses race tO market; many fail when the promised advantages dO not materialize. 1998 Montgomery and Lieberman question their original findings ⅲ their paper, " First-Mover (D (s)Advantages ". 2001 Amazon ℃ om returns its first profit. The firm's first-mover advantages were significant, but a good business model mattered more. f you need t0 buy a b00k online, which website dO you visit first? If you want tO research the author of the book, which search engine dO you use? The answers, most probably, are Amazon and Google,respectively. Such is the dominance Of these tWO lnternet giants that their names define their respective markets. BOth organizations have a s ignific ant edge in the markets they lead, but they achieved that dominance by different means. Amazon, launched in 1995 , gained its advantage by being the first First-movers have no competition and have the potential tO become market leaders . but unless the market is static and technological innovation is limited, the risk Of failure is high Later entrants enter a recognized market and know what mistakes tO avoid They stand t0 benefit most ⅲ a rapidly changing market in which technological innovation iS advanced. 夏取 order tO gain an edge, either be first, 0 ー be better. business tO enter the online retail market, establishing its brand name , and building a loyal customer base. Google, by contrast, was by no means first. When Google launched ⅲ 1998 , the market was already dominated by several large players; Google's edge came from offering a superior product - not only was it faster, but it produced more accurate search results than any Of its competitors. Getting intO a market first has significant advantages, but there are alSO benefits tO being second. The key is that in order to gain a competitive edge in the market, a business needs either tO be first, or it needs to be better. Market pioneers The benefits of being first into a market are known as "first-mover advantage", a term popularized in 1988 by Stanford Business School professor David Montgomery and hiS co-author, Marvin Lieberman. Although introduced a decade previously, Montgomery and Lieberman's idea tOOk particular hold during the dot.com bubble between 1997 and 2000. Spurred

S 頂訂 SMALL, THINK BIG Toys R Us. ) The online clothing segments Of this new market. But retailer bOO.com iS an example Of success is not guaranteed ー a 2012 a first-mover that had technological study revealed that on average, 65 superiority, but was ahead Of its per cent Of users delete apps within time ー the Site was tOO resource- 90 days of installing them If later entrants can leapfrog heavy for most consumers' SIOW pioneers, firms could be Timing is everything lnternet connections. Launched in better Off entering late. 1999 , boo ℃ om went into receivership The reason a first-mover does not the following year ー being first is always yield its promised not a guarantee Of success if the advantages is that much depends basic business model iS flawed. on timing, and therefore luck. Despite the evidence presented ln their 2005 paper, "The Half-Truth by G01der and Tellis, and examples of First-Mover Advantage", US such as GoogIe, it remains the business scholars Fernando Suarez case that first-mover advantage and Gianvito Lanzolla identified has captured corporate imagination. technological innovation and Mirroring the earlier dot.com mistakes Of these earlier entrants the speed at which the market goldrush, the recent boom in the and, quite simply, build a better iS developing as crucial in product. The organization realized market for web-based smartphone- determining whether or not being that with so much information on and tablet-accessed applications a first-mover iS advantageous. (the "app" market) is fuelled by the lnternet people wanted search Their findings suggest that a desire to be first. Thousands of When a market iS slow-moving and results that were comprehensive apps have launched in the hope technological evolution is limited, and relevant; the various market incumbents offered a variety Of Of staking their claims on lucrative first-mover advantage can be 》》 systems for filtering search results, but Google was able to take the best of these systems and build its own unique algorithm that led tO market dominance. Peter Golder and Gerard Te11is Launched just tWO years later, Commodore's "fast-follower" GUI computer yielded a shareholder return of 80 per cent. First-mover failures There are numerous examples in corporate history Of first-movers that were unable tO achieve or maintain a competitive advantage. Famous failures in the online sphere include Friends Reunited and MySpace. Although both firms still exist, their first-mover advantage was not sufficient tO offset the might (and product superiority) 0f Faceb00k. Similarly, eToys ℃ om, launched in 1999 , was one Of a new breed Of online retailers , but first-mover advantage was not enough tO sustain the business and the firm declared bankruptcy in 2001 - by coincidence, the same year that Amazon started tO sell toys. (Resurrected some years later, etOYS ℃ om iS now owned by ( ) N = に 3010 = 3 V = S 【 1 AppIe Lisa ( 1983 ) ロ Commodore Amiga ( 1985 ) IBM Personal System/2 ( 1987 ) HP ( 1989 ) Apple's pioneering GUI computer was a commercial failure, with a shareholder return Of ー 61 per cent. Being the first-mover intO a new, untried market does not always result in success. Apple's Lisa was the first computer with a Graphical User lnterface (GUI) ー a version of which now forms the user interface Of every computer, smartphone, and digital device ー yet sales were far exceeded by later offerings from Commodore, IBM, and HP.

WORKING WITH A VISION 169 For as long as products remain the only one 0f their kind available, the firm that is first tO market has a monopoly position; this means it can set the price, establish loyalty, and build a reputation before comp etitors catch up.When competition does arrive, the first-mover still has the advantage, because it has established itself. This is generally the case even When subsequent products are better than the first. lt's all in the mind AI Ries and Jack Trout, authors of The 22 加フ mu 亡 a わノ e Laws 九イ a ⅸ e 亡加 g, , developed a theory of why the first firm tO market can continue tO dominate. They proposed that the customer's perception Of where a product or service SitS in the market iS Of utmost importance, claiming that 'it is better to be first than it is to be better". lt is easier tO get intO the consumers' minds first than tO dislodge a product or service from their minds and convince them that your firm has a better product. Ries and Trout argued that most marketing stems from the assumption that firms are fightmg a product battle rooted in reality. But consumers are not concerned with reality; they make purchases based on perception. "Being first in the mind is everything in marketing. Being first intO the marketplace is important only tO the extent that it allows you tO get intO the mind first," say Ries and Trout. The car in 0 取 t Japanese car manufacturer Toyota aims to be first to market, and imparts this message in the minds of consumers with the slogan: ・ The car in front is a Toyota". Toyota was the first firm to introduce a hybrid car - With an engine drawing p ower from b 0th p etrol a nd electricity - tO market. lts Prius went on sale ⅲ Japan ⅲ 1997. Several manufacturers considering the concept 0f a hybrid car in the 1980S , but combining an internal combustion engine and an electric motor required significant investment. Despite this, Toyota knew that if they could lead the way, there would be a number Of advantages for the firm. First, Toyota would gain early-adopter consumers WhO were looking for 1 The key to success for S ony, and tO everything in business . . IS never to follow the others. lbuka Masaru Japanese co-founder Of Sony ( 1908 ー 99 ) Toyota's first move intO the market developed their own hybrid models, as Ford and Vauxhall, have now AIthough other companies, such closest rival Honda's 12.5 per cent. cent market share, compared tO in 2012 , giving Toyota a 21.1 per was the top-selling car in CaIifornia lead the hybrid market. The Prius ten years later Toyota continued tO worldwide in 2001 , and more than The Prius went on sale firm's innovative capabilities. Toyota's new products and the generating excitement about protection, while at the same time firm's commitment tO environmental because Of its clear message Of the it would enhance Toyota's image, would favour a hybrid car. Third, USA, where emissions legislation and existing markets, such as the car would increase access tO option. Second, creating a hybrid an environmentally friendly driving ever-growing market. ・ continues tO yield benefits in an in return for a market-leading position. tO invest significant development funds market for Toyota. The firm was willing won a sizable share Of the low-emissions The Prius petrol-electric hybrid car has

S 訂 SMALL, THINK BIG curve 58 ー 61 ■ Creativity and invention 72 ー 73 ■ Changing the game 92 ー 99 ■ Balancing long- versus short-termism 190 ー 91 See a 0 : Beating the odds at start-up 20 ー 21 ■ Stand out ⅲ the market 28 ー 31 ■ How fast to grow 44 ー 45 ・ The Greiner Amazon.com was a first-mover in the online retail market. lt has dominated the industry since its launch in 1995 , creating strong brand recognition and a loyal customer base. を access beneficial terms with key suppliers (whO may also be keen tO enter the new market). AdditionaIIy, first-movers may be able to build switching costs intO their product, making it expensive or inconvenient for customers tO swap tO a rival offering once an initial purchase has been made. Gillette, for instance, having invented the safety razor in 1901 , has consistently leveraged its first-mover advantage tO create products , such as a "shaving system' on by the example 0f Amazon, a brand name strongly linked tO that combines cheap handles with businesses spent millions pitching the market itself. First-movers also expensive razor blades. them s elves he ad-long intO new have more time than later entrants online markets. Received wisdom tO perfect processes and systems, at the time was that being first and tO accumulate market ensured that the firm's brand name knowledge. They can alSO secure became synonymous with that advantageous physicallocations (a prime location on a main street segment, and that early market Of a city, for example), secure the dominance would create barriers tO entry for subsequent competition. employment 0f talented staff, or ln the end, however, over- s pending , over-hyp e , and over- reaching intO markets where little demand existed was the downfall 0f many fledgling dot-coms. With notable exceptions, businesses First-mover advantages accrue found that promised returns were when a firm gains a first- not being realized and funds mover opportunity (through quickly ran short ー and for many 0f proficiency or luck) and is able these first-movers, failure followed. tO maintain an edge despite subsequent entry. Market strategies ln the case Of Amazon.com/ first- mover advantage consisted Of a combination Of factors. ln the newly emerging e-commerce market, customers were keen tO try out online purchasing, and . Amazon was well placed t0 exploit this growing curiosity. BOOks represented a small and safe initial purchase, and Amazon's simple web design made buying easy and enjoyable. Early sales enabled the organization tO adapt and perfect its systems, and tO adjust its website tO match customer needs ー adding, for example, its OneClick ordering system tO enable purchases without entering payment details. Amazon was also able to build distribution systems that ensured swift and reliable delivery of its products. Although competitors could replicate these systems, customers already trusted Amazon, and the brand loyalty 》》 First-mover advantage Being first out 0f the block undoubtedly has its advantages, and in the case Of the dot-coms, those advantages were exaggerated tO the extreme. F irst-movers Often premium prices, capture significant market share, and have David Montgomery and Marvin Lieberman

GAINING 印雕 have enjoyed short-lived advantage significant. They give the example but in dyn am ic markets such Of the market for VaC11L1m cleaners, an advantage is rarely durable. and, in particular, Of the long-term Even Apple, wh0 enjoyed significant market leader, Hoover. Until the early-entrant advantage in the relatively recent introduction Of sm artphone market with the Dyson cleaners, the market was iPhone, iS not immune from first- benign and technological mover disadvantage. Competitors, advancement SIOW. Having been Samsung in particular, were able first to market in 1908 , Hoover tO listen tO customer complaints enj oyed s everal dec ade s 0f about iPhones, analyse customer advantage ー an advantage that was (and, in some places, still is) needs, and produce products with features and functionality reflected in the widespread use welcomed by the market. Apple, of the firm's brand name as the locked int0 previous technology verb "tO hoover" iterations, tOOk time tO react and ln Other indu strie S , however, iPhone sales suffered as a result. where technological change or market evolution is rapid, first- movers are Often at a disadvantage. The first search engines are examples Of businesses that had tOO much invested in early iterations Of a technology tO keep up with the rapid pace 0f change. E arly advantage quickly becomes obsolete in changeable markets. As the market evolves, later entrants are those that seem t0 be cutting edge, offering innovative features that build on the market-knowledge as well as learning from the mistakes Of the first-mover. The first-mover may 38 If you do things well, dO them better. Anita Roddick UK entrepreneur ( 1942 ー 2007 ) importantly, the organization insists on a deep understanding Of customer needs in any market they enter. ln 0ther words, they would rather enter mature markets than TO gain an edge, therefore, you d0 not always need t0 be first. lndeed, be first intO new ones. US multinational Procter & GambIe, The firm values long-term for example, prefers only tO enter relationships with its customers and suppliers; itS View Of innovation those markets in which it can is different from small firms who, in establish a strong number one or number tWO position over the attempting tO c apture market share, strive tO gain an edge long-term ー rarely is this achieved ⅲ a blind rush to be first. through the introduction Of Procter & Gamble seeks disruptive technology ー innovative markets that are demographically technology that aims t0 destabilize the existing market. Procter & and structurally attractive, with lower capital reql-llrements, and Gamble, perhaps heeding the higher margins. But most research, considers SLICh strategies t0 be short-lived. They realize that overly rapid innovation runs the risk Of cannibalizing their own sales and reducing the returns on new product investment. ln the market for disposable baby nappies, for example, Procter & Gamble was more than ten years behind the first mover. The firm's now famous Pampers brand was launched in 1961 , following some way behind Johnson & Johnson's Chux brand, Customer needs The PalmPilot, launched ⅲ 1997 , was a successful fast-follower product. lt followed AppIe's unsuccessful Newton, which was the first personal digital assistant (PDA) tO enter the market.

GAINING AN 印 36 research has indicated that from entering a proven market. significant advantages accrue They are also able t0 avoid costly tO market pioneers, which can be investment in risky and potentially directly attributable t0 the timing flawed processes or technologies; Of entry. The irony is that in a first-movers, by contrast, may have retrospective paper that appeared accrued significant "sunk costs" in 1998 , "First-Mover (Dis) (past investment) in Old, less- efficient technologies, and may be Advantages" Montgomery and Lieberman themselves backed less able t0 adapt as the industry off from their original claims matures. Followers can enter at the concerning the benefits 0f being point at which technology and the first tO enter a market. processes are relatively well Building on the work 0f, established, with both cost among others, US academics Peter and risks being lower. Golder and Gerard Tellis in 1993 , FoIIowers may have to fight Montgomery and Lieberman's 1998 tO overcome the first-movers brand loyalty, but simply offering paper questioned the entire notion Of first-mover advantage. ln their a superior product that better research, Golder and Tellis had addresses customer needs iS found that almost half the first- often sufficient tO secure a market. movers in their sample Of 500 Brand recognition is one thing, brands, in 50 product categories, but technical and product superiority failed. Moreover, they found that can give that all-important there were few cases where later competitive edge. Moreover, with entrants had not become profitable investment COStS being much or even dominant players ー in fact, lower, followers often have surplus their research identified that the the organization enjoyed created cash tO use on marketing, thereby failure rate for first-movers was offsetting the branding advantages significant emotional switching 47 per cent, compared t0 only Of the first-mover. costs; even tOday, Amazon enjoys 8 per cent for fast-followers. the benefits 0f this trust and loyalty, When GoogIe, for example, and almost a third of all US book entered the lnternet search business in 1998 , the market was sales are made Via AI れ azon ℃ 01 れ . The challenge for first-movers is A recent example Of how dominated by the likes 0f Yah00, imp ortant firs t-mover advant age that the market is Often unproven; Lycos, and AltaVista, all of whom remains are the ・ patent wars' industry pioneers leap intO the dark had established customer bases contested between most of the without fully understanding and brand recognition. However, leading smartphone makers customer needs or market Google was able t0 learn from the (including Apple, Samsung, and dynamics. First-movers Often HTC). Patents help a firm to defend launch untried products ontO technological advantage. ln the unsuspecting customers; and it hyper-competitive smartphone is rare that they get it right first industry, being first tO market with time. Large firms may be able tO take the losses 0f such early-market a new technological feature Offers critical, albeit short-term, advantage. entry mistakes; small firms, on ln an industry in which consumers' the other hand, may soon find switching costs are high, even that their cash is running out short-term advantages can have and their tenuous business 1 れ OdelS a significant impact on revenue. are collapsing. Since the publication of Later entrants have the Montgomery and Lieberman's advantage 0f learning from the original paper ⅲ 1988 , academic mistakes Of the first-movers, and 日 T D 第ロ G 日 T ル日靆 NG 0 「 esh ”、” er ( om んな“ b 、 h “、 0 is oy 、 d by 山 em な記 00 「、 ew ー m ov “ー GilI 、“ 0 動“”ー me “ⅲ ( of ロ“新“「ⅵ“ who demand 山。 utmost “ⅵ results. 1 物 0 p ( 0 ー、 $ 5 れ d " p “ T ト” 0 に“ , 。”、・・耘 the 可 GilIette —•-RAZOR SAFETY 0 . LETI 工 SAFETY RAZOR CO .. BOST い、 . U. S. A. Gillette invented the safety razor in 1901 and later consolidated its fi rst-mover adva ntage by developing a "shaving system" that made it difficult for customers tO switch brands. Learning f ー 0 ー mistakes GOOd artists copy; great artists steal. Steve Jobs US former CEO of Apple ( 1955 ー 2011 )

166 『Ⅲ則 ASKED PEOPLE WHAT THEY WANTED THEY WO 乢 0 型 E S 0 FASTER HORSES 則 G THE MARKET 夏 CONTEXT FOCUS Market leaders KEY DATES 1780S British inventor Richard Arkwright devises a complete mechanized system for the production Of yarn on an industrialized scale. 1860S US general Nathan Bedford Forrest claims the key tO military success is "tO get there first with the most men". 1989 Dutch businessman Arie de Geus suggests that a firm's only sustainable competitive advantage is its ability tO learn faster than its competitors. 1994 AI Ries and Jack Trout publish The 22 lmmutable Laws 0fMarketing, ⅲ which they outline the advantages of being first tO market. usiness logic Often dictates: hold back; let someone else go first, incur the costs, and make mistakes. But there are many instances Of significant advantages for firms who are first off the mark. A firm that leads the way into a new market gains a competitive advantage, which might enable them tO dominate over the long term. Richard Arkwright, the inventor Of the modern factory system, is an example. He devised the first complete mechanized system for the spinning Of cotton yarn in the 18th century in Britain. His patents were overturned just five years after they were filed, but his head-start ensured that he

168 則 G THE MARKET ln 1979 Sony introduced the Sony WaIkman, the first portable music- listening device. Just as Ford had changed the way people travelled, Sony changed music-listening habits - and lifestyles. lts launch coincided With the aerobics craze, and millions used the Walkman tO add music tO their exercise workouts. Between 1987 and 1997 , the height of the WaIkman's popularity, the number 0f people taking up walking as exercise increased by 30 per cent, according a new market, such as Gillette, the superior products. Sony iS one t0 Time magazine. Sony sold 200 men's grooming business, With itS example 0f a technology firm that million Of their portable cassette long-held policy t0 be the "first t0 led the market for around 20 years, players, and by 1986 the word get it right". Some firms choose not until competition from new "Walkman" had entered the Oxford tO dO this; Samsung, for instance, technology arrived. English Dictionary. aims t0 be a fast follower, having Sony's corporate philosophy is The Walkman evolved from learnt from competitors. built on "doing things that no one cassette tO CD technology, and else is willing tO do". The business consumers were happy with their First-mover advantage was set up in the ruins Of TOkyo portable music players until 2001 Being first tO market gives a firm after WorId War Ⅱ , and the founder when Apple CEO Steve Jobs said: "first-mover advantage", which lbuka Masaru was determined to "The coolest thing about the iPod can be long-lasting or short-lived. develop leading-edge products and is that your whole music library fits Long-term advantage brings get them tO market faster than the in your pocket. " SO began a new durable benefits, either by creating competition. This idea became a industry, based around portable an entirely new market, or by personal obsession for lbuka and digital music, and dominated by improving a firm's market share hiS SUCCESSOY, Morita AkiO. market-leader Apple. over a long period. Firms that succeed in building long-term advantage Often dominate their product categories for many years. Biro, BIu-Tack, and Hoover, for instance, were SO successful in lt's not the consumers' their respective market sectors j0b t0 know what that their brand names have they want. become generic terms. Steve Jobs S hort-term advantage typic ally US former CEO of Apple ( 1955 ー 2011 ) occurs because it iS based on nevv technology. T0day, innovation is exceptionally fast in many sectors, with increasingly shorter gaps between new introductions and Yarn spinning was the first activity to become entirely mechanized. The British government restricted export of this te chnology, maintaining its first-mover advantage for as long as possible. い や Being first is everything Leading the way often depends on the product being embraced by "early adopters" ー consumers WhO are willing tO pay a price premium tO be the first tO own something. This happened with the launch of Apple's iPhone in the summer of 2007. Even though the price was reduced a few months after launch, those who had bought at the higher launch price did not resent it due to the cachet 0f being at the forefront 0f the latest trends and fashion.

114 SMALLIS 昨馳引 F 乢 夏 CONTEXT FOCUS lnternet business KEY DATES 1974 US computer scientists Vent Cerf and Bob Kahn design the first Transmission Contr01 Program, enabling computers tO talk tO each Other. 1977 The first electronic mail ("email") is sent, via the US Department Of Defense's ARPANET. 1991 The World Wide Web (WWW), the first widely accessible system tO share data files via the lnternet, is released by Tim Berners-Lee. 1993 Netscape launches Mosaic , the first commercial lnternet browser. 2013 More than two million third-party sellers us e Amazon tO reach their customers. By 2013 , Google employed 30,000 people worldwide, 0f whom around 53 per cent worked in research and development , which may explain the firm's phenomenal growth. hen British computer scientist Tim Berners- Lee harnessed the lnternet t0 develop the World Wide Web, he was simply creating a way Of sharing information. lt was DOi 取 9 business on the web not viewe d as a money-making exerci S e. However, the lnternet ' S AS two-way communication over disruptive power soon became clear: the lnternet became a reality during the 1990S , organizations it would change business and our began t0 see the potential offered way Of life, enabling commerce t0 be conducted by a profu s ion 0f by the new e-commerce platform. individuals and organizations. The first books were sold online Early search engines were in 1992 , and in 1994 Pizza Hut in invented as an increasing amount Of Santa Cruz, California, enabled people t0 order a pizza delivery information became available on the web. Larry Page and Sergey Brin, via the lnternet. two US c omputer s cienc e students , The idea of online selling t0 ok designed a search engine that could off ⅲ 1995 when Jeff Bezos dispatched the first b00k sold by quickly search all the available documents and generate highly Amazon.com/ then located in his relevant results. ln September 1998 Seattle garage. Around the same they set up a workspace in a friend's time, software programmer Pierre garage and OP ened a b ank acc ount Omidyar was starting a simple ⅲ the name 0f Google lnc. The website called AuctionWeb from soon-to-be giant business began, his San Jose living room. The first as Page said , with no more than " a product he posted for sale was a broken laser pointer. lt sold for computer and a part-time person . $ 14.83. Omidyar recognized the Within a year Google had 40 employees, and ⅲ June 2000 lnternet's power tO reach individual announced its first billion-URL customers, anywhere in the world, index, making it officially the when he che cked whether the world's largest search engine. buyer understood that the pointer Born in 1973 in Michigan, USA created a search engine called Lawrence (Larry) Page was BackRub, which operated 0 Ⅱ exposed tO computer technology Stanford servers until it outgrew from an early age; his father was a their capacity. The pair worked pioneer in computer SCience and together on a bigger and better his mother taught computer version, which they named programming. Page studied Google after the mathematical engineering at the University Of term " G00g01 " ー the number 1 Michigan and then completed a followed by 100 zeros. Page and Masters in computer engmeering Brin were jointly awarded the at Stanford University. Marconi Prize in 2004 , and Page On his first visit tO the campus, was elected to the US National Page was shown around by fellow Academy Of Engineering in postgraduate student Sergey Brin, 2004. Today GoogIe is the who would later be the co-founder world's most popular search Of Google. During a research engine, handling more than 5 project ⅲ 1997 , Page and Brin billion search queries every day.

FIRST OR 昨 聞 EDGE