First Movers Have an Advantage
I once read an article about Sabeer Bhatia, the co-founder of Hotmail.com. In the article it retold an account of the point in time he had the epiphany about the concept for Hotmail. He was on the phone with his partner & co-founder Jack Smith. He knew the powerful advantage of being the first mover in the niche, so much so that when he was on the phone with Jack discussing the concept he forced his partner to phone from a landline to avoid anyone snooping in on the call. He understood the immense advantage of being the first to create a new concept.
Being the first to market in any space has overwhelming advantages.
- Brand becomes synonymous with its niche. You have mindshare. Take a look at Groupon and Coca-Cola.
- You define the niche and all competitors are compared to your company.
- New entrants to the niche have to steal mindshare away from you.
There are also a number of downsides to being first.
- The potential for new concepts can be difficult for initial investors to grasp.
- As a trailblazer, your company goes through the growing pains of all the mistakes necessary to discover the right approach. This applies to areas such as marketing and day-to-day operations.
Being the first to create something has a halo factor. Your company is seen as an innovator. Becoming a successful, innovative company that creates a first of its kind product or service is part epiphany and pure luck. Consider Twitter. The initial concept for the 140 character social network was to further usage via cell phones using SMS. Its founders are astounded at how their product is being used today, something they never envisioned.
Building a Better Mouse Trap Can Be Wildly Successful
Another route to entrepreneurship is the seemingly less glamorous concept of building a better mouse trap. Being the company that is 2nd, 3rd…or even 4th or 5th in a space.
Taking an original concept and refining it. Fine tuning it to address the gaps the originators never addressed or simply overlooked. Some of the most wildly successful products we know and use today are better mouse traps.
There are some keen advantages being next in line in a niche.
- The market has been already defined by the incumbent.
- You can learn from the successes and failures of the original concept.
Some downsides to being 2nd in line can be a deterrent.
- You will be competing with dozens of other “me too!” companies in the space.
- Some investors may be dissuaded betting on a second entrant as the upside doesn’t seem as big.
- You aren’t the darling of the industry, therefore you don’t get as much coverage.
- Mindshare is (usually) owned by the originator.
Home Runs Are Great, But Hitting a Few Singles Wins Games Too
So now you’re faced with the very difficult task of deciding to invest your time and effort trying to create the next TechCrunch darling or taking the equally challenging road of making something even better than v.1.
Sure being first to come up with a concept should be rewarded. When done right, your brand is synonymous with all the products in your niche. Just ask Kleenex or Groupon. There are plenty of examples where this is the case. But for some reason entrepreneurs and investors get tunnel vision and look down upon second and third entrants to a niche. They’re called “me too!” companies. “Me too!” has undertones of being unoriginal or inferior. A “me too” company is riding on the coat tails of an incumbent. “Me too” sounds like its destined to fail.
I disagree with this perspective that if you’re a 2nd, 3rd…or even 4th or 5th in a space that you aren’t worthy of accolades. Some of the best products and brands out there were born out of incremental innovation. Seeing the opportunities or cracks that the originators overlooked or didn’t bother to pursue. The internet and tech industry is rife with examples of companies and entrepreneurs that said “Screw it, we can do it better!”.
I admire companies that build a better mouse trap. They fought through naysayers by showing them there was a better way to serve their customers. Some of the best products I know took a fresh approach to an older problem and did it better.
Should you try to hit home runs by being a first mover? Or should you hit singles and build better mouse traps? Homers are hard to come by, lightning in a bottle type stuff.
So for entrepreneurs out there who are frustrated trying to create a new concept. There’s no shame in making something even better.
And to investors? Just remember, Google wasn’t the first to market.