Generating customer loyalty and other brand-based advantages takes time, so newer firms or products may face a disadvantage to the incumbent. Second, the early incumbent can create customer lock-in as it sells to a growing customer base. Customers form their preferences around such product benefits that the firm then leverages into greater demand. Amazon established one-click shopping early on, and customers quickly came to expect easy internet shopping. Incumbents that are early can basically teach customer what they should like, which of course reflects what the firm’s own products deliver. The customer base can exhibit demand tendencies that may benefit the incumbent over newer competitors in three ways.įirst, early in any product market, customers need to learn what a product is supposed to do and resolve uncertainties about what benefits the product may hold. This “supply-side” view to the curse of incumbent inertia and lack of innovation is well known, but there’s another side to the story. Our research shows that the incumbent firm has potential “demand-side” advantages that can help it compete and innovate. Tesla seems to be outrunning the legacy car companies, and even Apple gets accused of not being innovative enough anymore in its new products. Incumbent companies spend years establishing skills, knowledge, routines, and assets that help serve their current markets, but this experience base can be ill-suited for anything other than incremental innovation. Using these advantages, encourage your organization to innovate into new markets.įailing to do so increases a firm’s risk of losing its first-mover advantage.Įstablished firms often have trouble maintaining an innovation streak they may have enjoyed in their earlier years. Expanding the initial customer base via network effects Instead, followers can take advantage of the available new technology.Recognize the 3 major sources of first-mover advantage: They come to the market with superior offers to capture more market share.įourth, first movers may invest heavily in older technology. They can learn from the mistakes first movers make and improve the product or way it is sold. Third, followers can imitate the skills and knowledge the first movers have acquired expensively. However, they usually cover a small proportion of consumers. Only a few may be willing, such as innovators and early adopters (see innovation diffusion). ![]() ![]() The risk of rejection is high because consumers are reluctant to try new products. Second, first movers are more prone to mistakes as they face uncertainty in new markets. Because the version is better, consumers may prefer their product. Development costs are also lower as they can inspect and fine-tune products from first movers. They may not need to spend more money educating consumers. Consumers may get higher satisfaction from follower products.įollowers do not bear the expensive initial investment. All of this can be very expensive and time-consuming.īut, it turns out, buyer loyalty is weak. Companies must start technology, develop distribution channels, and educate customers about products. Some of the weaknesses attached to them, including:įirst, the first movers bear substantial investment to develop new markets. Causes of first-mover disadvantagesįirst-mover status is not always favorable. Later entrants (followers) may be more successful learning from first-mover mistakes. However, not all of these advantages last.
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