The Myth of the First Mover Advantage
Get
to the market first and you capture most of the business, right? Not anymore.
Customers are too demanding and competitors are too good. Your product and
service has to deliver everything you've promised from day one.
Executive director, Ed Kaplan Family Institute for Innovation
and Tech Entrepreneurship, Illinois Institute of Technology
We
spend a lot of time talking about first movers in the startup world. We
pretty much take it for granted that getting out there as soon as possible with
our idea is basically a good thing even though there are clearly downsides to
being a pioneer, including the problem of winding up with a bunch of arrows in
your back from both fast followers and from increasingly smart, rapidly
reactive and agile incumbents as well.
Being
first is nice, but in the long run, consumers ultimately go with the best.
Among online shoppers these days, there's a lot more caution and conservatism,
because too many of them have been burned by startups that got too far out over
their skis and couldn't deliver the goods or services promised. Rent
the Runway may play into the new thrifting and sustainability
trends that are so popular right now, but if the company can't handle the influx of new customers or
ship their goods on time, its service isn't a bargain or a benefit for
anyone. Don't think you can have too many customers? Or that it's a
problem that just startups face? Ask Apple (iPads), Microsoft (Xboxes), Toyota
(Priuses), or even Amazon with the early Kindles? They've all run out or sold
out of key new products.
Being
the "best" these days can mean a lot of different things in the
consumer's mind. Best can relate to quality, service and support, reputation,
consistency, longevity, stability, etc. This is one of the reasons that
startups often end up setting the table and identifying new market
opportunities for the big guys to then jump all over. When the elephants dance,
the little guys and the grass take a beating.
New
product ideas and speed to market are important, certainly, but they're not the
only success factors - especially when you're talking about certain kinds of
household products that we buy infrequently and hang on to for a long time.
Refrigerators and washing machines are good examples. Mattresses are another instance
of something, you would think, that we'd want to be durable and long-lasting,
rather than disposable. Yes, you could argue that, for kids in their first
apartments, these foam-slab mattresses made and shipped by outfits such
as Casper make as much sense as anything
else in a world where it's all about near-term utility and not about
possessions or ownership.
But
even if your customers don't plan to keep their mattresses forever, that's only
half the problem with this particular business model. The central question is,
how often am I gonna buy a new mattress (not very) and what, if anything, do
you think you're going to sell me in the meantime? And why should I believe
that you bring any supply chain edge, assembly or manufacturing skill, or other
competitive advantage to sell me a lot of other stuff that I can get (and have
been getting) from a million other places? It's not like I never bought sheets,
pillowcases, duvets, and even bed frames in the past. There's a Bed,
Bath & Beyond everywhere you look. (Okay, maybe less than
everywhere--the company just announced it was shutting 40 stores.)
And
some brands and some businesses just don't stretch no matter how hard you try
or how much wishful thinking you do. I really love my Kohler sinks, tubs and
toilets, but I draw the line at stopping by the Kohler Water Spa to learn about the
healing properties of H2O.
This is
similar to the case I made against the Uber model. My main point was that not every business or industry can be Uber-ized.
And, that's why I say Casper and its counterparts and colorful competitors
like Purple and Avocado are ghosts in the making. Not only isn't
the model extensible in any convincing fashion, it's vulnerable in too many
ways. Fast followers like Leesa and Saatva are all over the place with New York
Times ads dumping on the "bed-in-a-box" concept and the big sleep
guys, Serta Simmons and Tempur Sealy, are building (Cocoon) or
buying their way (Tuft & Needle) into the space as well.
It's
increasingly important when you look at the prospects for a given new business
that you identify the kinds of products and services that have no business
being a first mover (or maybe any "mover" at all) because they have
no sustainable business idea that can scale and grow beyond that first frantic
and frothy stage. The vast majority of these companies "start", but
they never "up". And we're starting to see more and more
examples of this "one-trick pony" problem where there's just no
worthwhile place for the new business to go or to grow because their basic product
or service offering can't or won't scale.
Because
this is not a dream at all - it's a nightmare waiting to happen.