The Half Truth About The First Mover Advantage

Topics: Marketing, Technology, Harvard Business School Pages: 28 (5281 words) Published: April 12, 2015
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BEST PRACTICE
First-mover advantage is
more than a myth but far less
than a sure thing. Here’s how
to tell when it’s likely to
occur—and when it’s not.

The Half-Truth of
First-Mover Advantage
by Fernando Suarez and Gianvito Lanzolla


Reprint R0504J

This document is authorized for use only by STEPHANIE BIFOLCO in Global Strategy - BMBA1 - Back Bay at Hult International Business School2015.

For the exclusive use of S. BIFOLCO2015.

First-mover advantage is more than a myth but far less than a sure thing. Here’s how to tell when it’s likely to occur—and when it’s not.

BEST PRACTICE

The Half-Truth of
First-Mover Advantage
by Fernando Suarez and Gianvito Lanzolla

COPYRIGHT © 2005 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.

Some management concepts have such intuitive appeal that their validity is almost taken for granted. First-mover advantage is one
such concept. Although the fate of its mostconvinced adherents, the dot-coms, offers a cautionary lesson, managers’ faith that firstmover status brings important competitive advantages, even when network effects are not available to accelerate and entrench it, remains undiminished. Business executives from every kind of company maintain, almost

without exception, that early entry into a new
industry or product category gives any firm an
almost insuperable head start.
But for every academic study proving that
first-mover advantages exist, there is a study
proving they do not. While some well-known
first movers, such as Gillette in safety razors
and Sony in personal stereos, have enjoyed
considerable success, others, such as Xerox in
fax machines and eToys in Internet retailing,
have failed. We have found that the differences
in outcome are not random—that first-mover
status can confer advantages, but it does not do

harvard business review • april 2005

so categorically. Much depends on the circumstances in which it is sought. One possible explanation for Sony’s success
is that its strong brand name, substantial financial resources, and excellent marketing skills allowed it to make the most of its first-mover status. But Xerox, too, had a great brand name, deep pockets, and many valuable skills. And

Sony, despite its brand and marketing muscle,
could not translate being the first mover in
home VCRs into anything approaching its success with the Walkman. Yes, a firm’s resources—and luck—are important, but certain other factors and conditions can be decisive as well.
Our research, based on a thorough examination of the literature on first-mover advantage, as well as an analysis of more than 30 cases of
early entry into new product spaces, has enabled us to identify situations in which companies are likely to gain first-mover advantages and those in which such advantages are less
likely. Specifically, we identified two factors
that powerfully influence a first mover’s fate:

This document is authorized for use only by STEPHANIE BIFOLCO in Global Strategy - BMBA1 - Back Bay at Hult International Business School2015.

page 1

For the exclusive use of S. BIFOLCO2015.
The Half-Truth of First-Mover Advantage •• •B EST P RACTICE

the pace at which the technology of the product in question is evolving and the pace at which the market for that product is expanding. Knowing how fast or slow the technology and the market are moving will allow you to

understand your odds of succeeding with the
resources you possess.

What Kind of First-Mover
Advantage?

Fernando Suarez (suarezf@bu.edu) is
an associate professor of management
at Boston University. He is also a regular
visiting professor at London Business
School and at the graduate business
school of Universidad de los Andes in
Santiago, Chile. Gianvito Lanzolla
(glanzolla@london.edu) is a faculty
research fellow at London Business
School.

harvard business review • april 2005

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