We’re conditioned to believe that being first in everything should be our ultimate goal, that if you’re not winning, you’re losing. But I’ve actually studied the results over time, and there’s one instance when being first isn’t an advantage—in fact, quite the opposite is true.
When you’re in a new, emerging market, being first can be a huge disadvantage, and if you look at the performance of companies over time, you may see the early entry fizzle out or struggle mightily for a number of reasons. Let’s look at a few reasons why being first isn’t necessarily best.
No. 2 can fly under the radar.
Need evidence that being second to market can sometimes be best? Take a look at the alternative transportation boom. For years, established transportation like taxis, metro systems and buses were really the only legal means of transportation. Until Uber. Uber revolutionized the way millions of riders get from point A to point B, and they simultaneously offered thousands of drivers a means of making money simply by driving. But Uber’s innovation hasn't been without its problems—expensive and time-consuming problems. While lawsuits and taxi union protests have made the road a rocky one, companies like Lyft and others might be able to see the potholes and make course corrections before they end up facing similar challenges.
Takeaway: Being no. 2 means you may be less likely to be the prime target.
No. 2 can learn from No. 1’s mistakes.
Whether you were planning a baby shower or a bachelor party, you may have organized your parties using Evite. It took a decade for a real challenger to come along. When Pingg was launched in 2008, it didn’t start as a copycat, but rather as an option that offered more than Evite: With Pingg, users can link to third-party ticket sites, make online donations and even send invitations via snail mail for a memorable touch.
Takeaway: When there’s a category leader, identify all the problems or oversights you want to address, and launch your second entry as a real challenge—poised to take over the category.
Being No. 1 can cost more.
Think about the Apple and the ubiquitous iPhone. It’s a ubiquitous brand that manages to generate buzz for every new product launch. But Apple didn’t create the mobile phone. Other companies like Motorola and Nokia poured millions of dollars into product development and market research, only to be overtaken by the Apple phenomenon.
Takeaway: Launching a new category can cost a lot, both in terms of money and of effort, and it can be incredibly beneficial to let the frontrunner foot the bill before you swoop in as the second entry and take over the market.
No. 1 must create the market.
Coca-Cola is a category creator and leader in soft drinks. It’s an American symbol and the behemoth to beat. But Coca-Cola had to create the case for soft drinks, leaving plenty of room for subsequent entries to get a piece of what has turned out to be a gargantuan pie. You don’t have to be the category leader to make a bundle of cash by selling soft drinks. Latecomers like Jones Soda Co carve out a niche for unusual flavors and natural ingredients, and while they may not hurt Coke’s market share, they can still pull in a tidy sum.
Takeaway: Letting the frontrunner create the market can give you space to take your portion of it—without any of the original investment.
No. 2 can outlast No. 1.
Here’s an example that has less to do with the bottom line and more to do with an organization’s longevity. The On-Line Guitar Archives (OLGA) was nothing more than a collection of user-generated tabs—musical notation for guitar players who wanted to learn different songs. A user would figure out the chords played, transcribe it as a tab and upload it to the site, where other users could download the tabs for their own personal use. As you might imagine, music publishers—folks who sell sheet music—objected vigorously. OLGA would be issued a takedown letter, have to move their tabs to a new server, only to be served with another take down notice. Finally, OLGA was permanently shut down.
You might think that after the OLGA saga, no one would ever attempt to take on the music publishing industry, but you’d be wrong. Ultimate-Guitar.com has a catalog of more than 800,000 user-generated tabs and a community of over 10,000,000 registered users. Why did Ultimate-Guitar.com succeed where OLGA failed?
Because OLGA was first.
It was the target for angry music producers, and Ultimate-Guitar.com managed to navigate the tricky waters of distributing tabs and is still around to this day.
The final takeaway is this: Being second to market can carry some distinct advantages. You may not be the target for the companies you’re displacing, you won't have to front the cash for researching and creating an emerging market, and you can benefit from seeing how your predecessor was tripped up. Never, ever lose the opportunity to learn from another entrepreneur’s challenges.
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