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mistakes of these earlier entrants
and, quite simply, build a better
product. The organization realized
that with so much information on
the Internet people wanted search
results that were comprehensive
and relevant; the various market
incumbents offered a variety of
systems for filtering search results,
but Google was able to take the
best of these systems and build
its own unique algorithm that led
to market dominance.

First-mover failures
There are numerous examples in
corporate history of first-movers
that were unable to achieve or
maintain a competitive advantage.
Famous failures in the online
sphere include Friends Reunited
and MySpace. Although both
companies still exist, their first-
mover advantage was not sufficient
to offset the might (and product
superiority) of Facebook. Similarly,
eToys.com, launched in 1999, was
one of a new breed of online retailers,
but first-mover advantage was not
enough to sustain the business and
the company declared bankruptcy
in 2001—by coincidence, the same
year that Amazon started to sell
toys. (Resurrected some years later,
etoys.com is now owned by Toys R

Us.) The online clothing retailer

boo.com is an example of a first-

mover that had technological

superiority, but was ahead of its

time—the site was too resource-

heavy for most consumers’ slow

Internet connections. Launched in

1999, boo.com went into receivership

the following year—being first is

not a guarantee of success if the

basic business model is flawed.

Despite the evidence presented

by Golder and Tellis, and examples

such as Google, it remains the case

that first-mover advantage has

captured corporate imagination.

Mirroring the earlier dot-com gold

rush, the recent boom in the market

for web-based smartphone- and

tablet-accessed applications (the

“app” market) is fueled by a desire

to be first. Thousands of apps have

launched in the hope of staking

their claims on lucrative segments

START SMALL, THINK BIG

of this new market. But success

is not guaranteed—a 2012 study

revealed that on average, 65

percent of users delete apps within

90 days of installing them.

Timing is everything

The reason a first-mover does

not always yield its promised

advantages is that much depends

on timing, and therefore luck. In

their 2005 paper, “The Half-Truth

of First-Mover Advantage,” US

business scholars Fernando Suarez

and Gianvito Lanzolla identified

technological innovation and the

speed at which the market is

developing as crucial in

determining whether or not being

a first-mover is advantageous.

Their findings suggest that

when a market is slow-moving and

technological evolution is limited,

first-mover advantage can be ❯❯

If later entrants can leapfrog

pioneers, companies could be

better off entering late.

Peter Golder and

Gerard Tellis

Being the first-mover in a new, untried market

does not always result in success. Apple’s Lisa was

the first computer with a Graphical User Interface

(GUI)—a version of which now forms the user

interface of every computer, smartphone, and

digital device—yet sales were far exceeded by

later offerings from Commodore, IBM, and HP.

Apple’s pioneering

GUI computer was a

commercial failure,

with a shareholder

return of -61 percent.

Launched just

two years later,

Commodore’s

“fast-follower” GUI

computer yielded a

shareholder return

of 80 percent.

SHAREHOLDER RETURN (%)

80

73

36

-61

Apple Lisa (1983)

Commodore Amiga (1985)

IBM Personal System/2 (1987)

HP (1989)