3535
on by the example of Amazon,
businesses spent millions pitching
themselves headlong into new
online markets. Conventional
wisdom was that being first
ensured that the company’s brand
name became synonymous with
that segment, and that early market
dominance would create barriers to
entry for subsequent competition.
In the end, however,
overspending, overhype, and
overreaching into markets where
little demand existed was the
downfall of many fledgling dot-coms.
With notable exceptions, businesses
found that promised returns were
not being realized and funds quickly
ran short—and for many of these
first-movers, failure followed.
First-mover advantage
Being first out of the block
undoubtedly has its advantages,
and in the case of the dot-coms,
those advantages were exaggerated
to the extreme. First-movers often
enjoy premium prices, capture
significant market share, and have
a brand name strongly linked to
the market itself. First-movers also
have more time than later entrants
to perfect processes and systems,
and to accumulate market
knowledge. They can also secure
advantageous physical locations
(a prime location on a main street
of a city, for example), secure the
employment of talented staff, oraccess beneficial terms with key
suppliers (who may also be eager to
enter the new market). Additionally,
first-movers may be able to build
switching costs into their product,
making it expensive or inconvenient
for customers to switch to a rival
offering once an initial purchase
has been made. Gillette, for example,
having invented the safety razor in
1901, has consistently leveraged its
first-mover advantage to create new
products, such as a “shaving system”
that combines cheap handles with
expensive razor blades.Market strategies
In the case of Amazon.com, first-
mover advantage consisted of a
combination of factors. In the newly
emerging e-commerce market,
customers were eager to try online
purchasing, and Amazon was well
placed to 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—adding, for
example, its OneClick ordering
system to enable purchases
without entering payment details.
Amazon was also able to build
distribution systems that ensured
quick and reliable delivery of its
products. Although competitors
could replicate these systems,
customers already trusted
Amazon, and the brand loyalty ❯❯See also: Beating the odds at start-up 20–21 ■ Stand out in the market 28–31 ■ How fast to grow 44–45 ■ The Greiner
curve 58–61 ■ Creativity and invention 72–73 ■ Changing the game 92–99 ■ Balancing long- versus short-termism 190–91
START SMALL, THINK BIG
Amazon.com was a first-mover
in the online retail market. It has
dominated the industry since its
launch in 1995, creating strong brand
recognition and a loyal customer base.First-mover advantages
accrue when a company
gains a first-mover opportunity
(through proficiency or luck)
and is able to maintain an
edge despite subsequent entry.
David Montgomery and
Marvin Lieberman