What Is First Mover Disadvantage? Definition & Examples

Have you ever heard of the “first mover disadvantage”? It’s an exciting concept in business strategy that refers to the potential downsides of being the initial company to enter a new market or introduce a novel product or service.

Being the pioneering “first mover” seems desirable – you get a head start on competitors and establish brand recognition early on. However, there are some risks to keep in mind, too. For one, you take on the most considerable costs of being an industry trailblazer. Significant investments are required for research and development, new production and distribution channels, and marketing your new offering.

Meanwhile, your initial products are unlikely to be fully optimized yet. First generations tend to have more bugs compared to later, refined versions. This allows followers to learn from your mistakes as they swoop in with improved offerings once the market has been proven. They can also benefit from technologies advancing faster than their initial capabilities.

Brand loyalty also has yet to be established when you’re brand new. Consumers have yet to grow accustomed to choosing you and may be open to considering alternatives from companies entering later. Pioneers also need more certainty in forecasting actual customer demand since the market is untested.

So, while being first affords advantages, it comes with high costs and risks that followers often don’t bear as heavily. Later entrants can sometimes surpass early leaders by learning from their trial-and-error innovations. History shows advantages are often gained by being second or third to move after the pioneers have smoothed out the rough edges.

These were just the peripherals, let’s shed some more light on the concept to get a better understanding. 

How Being the First Mover Can Negatively Impact Businesses

Many entrepreneurs dream of being the first mover in their industry, believing it gives them an advantage. While getting in early does provide opportunities, it can also leave you open to challenges that later competitors may avoid. We will further share examples and some lessons learned about the downsides of pioneering so you know what you may be up against if you rush to launch first.

For the starters below are the few challenges that business might have to face being the first movers:

• Pioneering an untested market comes with risks. You have to invest heavily to define standards and create awareness.

• You take on the costs of mistakes and challenges that followers don’t. Early failures stick more in customers’ minds.

• Technology and customer preferences evolve rapidly. What worked for early adopters may no longer satisfy mass tastes.

• Imitators observe your strategies and mistakes and improve upon them. You don’t get the benefit of learning from others.

• Building economies of scale takes time. Late entrants can enter with a more polished product at lower costs once the category is proven.

Suggested Read: Advantages of Being a First Mover

Examples of Unsuccessful First Movers

Here are some examples of Companies that Struggled as First Movers:

Friendster

A social networking site that debuted in 2002, predating Facebook by two years, experienced initial success. However, it was eventually overtaken by Facebook due to its inability to adapt to the evolving needs of its users.

Google+

Google launched its Google+ social network 2011 to compete with Facebook, but it came late to an already crowded market. Despite Google’s resources and user base, Google+ struggled for engagement and is being phased out.

Quibi

This mobile streaming service premiered in 2020 with short video episodes for on-the-go viewing. However, it arrived as people spent more time at home during the pandemic. Quibi couldn’t differentiate itself from YouTube or keep viewers interested. It shut down after just six months.

JooJoo

The JooJoo tablet computer launched in 2010 as an early touchscreen device running its OS. While innovative, short battery life, poor app selection, and high price sealed its fate. Consumers needed more time to be ready to adopt an unfamiliar platform.

Being too far ahead of trends or tastes can leave early pioneers open to competitors who can iterate and improve their formulas for increased success. Sound market understanding is critical.

Identifying Situations Where First Mover Is the Best Strategy

When Being First Is The Way To Go:

• Establishing industry standards: If you can define how a new market operates like Bluetooth did for wireless tech, you gain massive influence over the direction.

• Network effects: For platforms that grow more useful as more people join, like Facebook, pioneering builds critical mass no others can match

• Existing resources/capabilities: If you already have needed skills or assets, leverage them to solidify leadership—Tesla did this in electric vehicles

• Proprietary tech: When able to patent core ideas, like how Kindle defined e-readers, you earn the right to dominate category development

• Niche opportunities: Small, specialized markets may not attract others, granting first company ownership—Fitbit in fitness trackers, for example

• Regulatory/legislative changes: Capitalizing instantly on shifts like marijuana legalization before competitors move prevents loss of first-to-market edge

• International expansion timing: Sometimes being first abroad, like Toyota in many Asian/African markets, gives lasting brand authority

• Incumbency advantages: Innovation or operational improvements may let industry stalwarts leapfrog followers, as Amazon did in cloud tech

• Speed to the concept: Fast execution of viable ideas before others catch the vision, like YouTube and sharing videos online.

In these scenarios, pioneering improves long-term position by establishing category norms or regulatory arrangements before others shape definitions or standards. Moving first multiplies the ability to define directions in new arenas.