Startups: The First-Mover Advantage And Why It Is So Important

There is an innate urge for humans to seek out new experiences and to be the leader of the pack. It speaks to our psychological need for acceptance, validation and belonging, not to mention that there is usually significant financial gains to be made. The need to be the first and stake out a monopoly can be seen across all industries. This doesn’t happen on its own, however, as we have the first movers who seize an opportunity and subsequently set themselves up to control and facilitate this movement.

first-mover advantage

First movers and the first-mover advantage is a concept well known in technological leadership, and it has spelled success and profit for many enterprises. Let’s discuss why the first-mover advantage is still seen in 2020, and why it pays to be first.

What is the first-mover advantage?

As the name suggests, the first-mover advantage is when a group or leader seizes a resource or creates technology, and then brings a product or service to the market that is dependant on the user or future businesses requiring that resource and technology. It’s also the unwritten startup app development philosophy, and we have seen this through the ages with organisations buying up the market of a manufacturer, warehouse or precious metal that is a core material in the build of new technology. You only need to look at the never-ending conflicts over global oil supply to appreciate how impactful it is to have a monopoly over the market.

First-mover advantage and technology leadership

Let’s walk through some real-life examples of first-mover advantage in motion, and the few ways it can end up. A good example is when the Calm mindfulness/meditation app hit the market and already had a suite of resources, celebrity partnerships (leading the mediations) and their own commissioned music. This made it difficult for other apps to enter the arena (and none did for a while), as there was such a comprehensive offering already on the market, with the technology, celebrity partnerships, resources and automation already established and patented. Eventually, there were other apps that found a way into the industry, specialising in other areas but trying to get as close to Calm’s market share and inspiration as they could.

Out of stock - an issue with first-mover strategy

Is the first-move advantage ethical?

Unfortunately, the first-mover advantage isn’t always ethical, especially when the circumstances are direr than simply monopolising a trivial or luxury product. With the recent COVID-19 pandemic, we have seen people try to seize huge volumes of masks and hand sanitiser so that they can set the price of PPE and make an exponential profit given the circumstances. This is a dangerous scenario to entertain because it throws out the market equilibrium. For most of our consumables and services, the supply is greater than the demand, and so the buyer ultimately sets the price – what am I willing to pay for this? When the demand is greater than the supply, the supplier can set the price – what am I willing to sell this for?

What can startups learn from a successful first-move advantage?

Given the gains and impacts that can be seen from leveraging the first-mover advantage, what can startups learn from this aggressive tact? It certainly demonstrates the importance of planning, research and making a move at the right time. It also comes with a warning, that while monopolising a resource is advantageous, a startup must ensure that their entire strategy isn’t dependant on this fact, as the market and our society can turn in a day and a positive position can become unviable in the blink of an eye.

Wherever you are in your ideation pipeline, stop and assess the market and see if you are the first or second to bring a concept to your audience, and what supporting resources might you need to secure to give yourself an even greater advantage.