You’re working on what? “Me too.”
When I tell an entrepreneur about a new product or service idea, he’ll ask, “Has it been done before?”
A lot of entrepreneurs – myself included – think along these lines; We hear a new idea and want to know if it’s truly innovative. And we consider our own ideas in light of those products and services that already exist.
But in so doing we exaggerate the relevance of first mover advantage.
FMA says that when a firm is first to enter a market with a new offering, it has demand and supply-side advantages over its competitors by virtue of its favorable timing. That’s because it can do a few things that later entrants (supposedly) can’t, such as:
- winning a spot in the market’s mind
- locking up key resources, and
- price skimming
So the theory goes.
But FMA is tough to prove empirically. Many street-savvy entrepreneurs put absolutely no stock in it. Others believe its advantages, if calculable, are fleeting.
That’s because “me too” companies (i.e. those firms that ride the market waves created by successful offerings which precede them) command several advantages of their own.
Consider Facebook (MySpace). Six Apart’s TypePad (Blogger). Apple’s iPod.
Companies of this variety are able to exist in the same market as — and in some cases usurp the power of — entrenched players.
That’s because they must:
- invest less in R&D and market research, and
- spend less time and money readying the market for its innovation (consider that while Rio had to spend millions telling the marketplace what an mp3 player is and does, Apple – who incidentally followed Rio – delivered its offering to an informed marketplace. And won to the tune of billions in revenues.)
Not bad.
The point is that there’s often plenty of room for more than one heavyweight in a marketplace. And that while that fact is often lost on we innovation-obsessed entrepreneurs (“I needs to do something new – something that’s never been done before”), it’s worth considering when we next evaluate a market opportunity.
If nothing else, we’ll know that our attempts to develop “me too” offerings put us in good company.
Brian Lash is founder of The Tipping Blog and writes about the entrepreneurial experience at BrianLash.com
One Comment
David Askaripour
March 18th, 2007 at 10:14 pm
Powerful article. And it goes even further than that. Using facebook as an example, which followed the suit of MySpace, now commands an ever larger following of copy-cats — some of which have received million in venture funding and even acquisitions. Indeed, first movers advantage is strong, very strong, but, like you suggest, it’s not a 0-sum game: everyone can win. Well, to be more precise, the savvy and clever players can still win.
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