The Business Book

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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 in 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

I

f you need to buy a book
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
Internet giants that their names
define their respective markets.
Both organizations have a
significant 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

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

GAINING AN EDGE

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 to benefit most in a rapidly changing market,

in which technological innovation is advanced.

In order to gain an edge,

either be first, or be better.

IN CONTEXT

FOCUS

Competitive advantage

KEY DATES

1988 US scholars David

Montgomery and Marvin

Lieberman write “First-Mover

Advantage,” outlining the

competitive advantages

of being first to market.

1995 Amazon.com launches,

the first of a new breed of

online retailers.

1997–2000 Adopting the

“be first” mantra, dot-com

companies race to market;

many fail when the promised

advantages do not materialize.

1998 Montgomery and

Lieberman question their

original findings in their paper,

“First-Mover (Dis)Advantages.”

2001 Amazon.com returns

its first profit. The company’s

first-mover advantages were

significant, but a good business

model mattered more.