First-mover Last-mover Advantage: Is It Really Good To Be Early?

In the business world, it is widely known that the first to market — the so-called “early bird” — will attain and retain a long-term advantage because their brand will be recognized and they’ll have time to scale. This is one of the first principles you are taught in business school. Professors love preaching this side of the story, but not the less appealing aspect which is more accurate in the real business world. History shows that companies can also take over markets not as first-movers, but as last-movers — Google and Facebook can be our examples.

Think about it. It makes absolutely no sense for a first-mover to dominate. The market is fresh. Customer demands are highly unknown. Every move is inherently risky. This gives the last-mover, who makes a strategic move to dominate the market, a huge advantage. They sweep up all the knowledge accumulated by the first-mover, evade the mistakes they made, and win as a result. First-movers are bold and get kicked out by last-movers if they are not able to gain traction and dominate the market. Picture Netscape and Google. In the 90s, Netscape held over 90 percent of the browser market. Google, a last-mover, made Netscape disappear by the turn of the century. It built a monopoly that was able to capture most of the market, having learned from previous mistakes.

That’s key to understand. When the last-mover arrives in the market, it has one of the strongest assets that any business can have: the knowledge of mistakes made by competitors. In fact, when building a business, you can do it solely by looking at what previous companies have done wrong and avoiding it, and looking at what they have done right to copy it. Being the first-mover doesn’t mean anything when you cannot scale and build a robust brand around a thing customers genuinely like. And that is, by definition, incredibly hard to do when there is no previous knowledge to help you.

Peter Thiel, in his book Zero to One, explains how you can go about building a monopoly. Start small. Don’t try to conquer the world. It is way easier to conquer a tiny group of people that absolutely delight in your product or service. Scale thereafter. Amazon started small — as an online bookstore. It was a niche. They could have sold everything from day one. Instead they dominated the books and expanded afterward — nowadays you can find gourmet pasta, adult toys, and cinema cameras on the same webpage, all with fast delivery options. Then continue expanding. Dominate, niche by niche, instead of trying to disrupt markets or innovate. Boom: you have built a monopoly as a last-mover.

Real-world examples of first-mover and last-mover advantage:

• Tech Industry: Apple’s iPhone introduced in 2007 was a first-mover, setting the benchmark for future smartphones, allowing it to establish a strong ecosystem despite high marketing costs. Google’s Android was a last-mover, entering the smartphone market slightly later, quickly capturing a large market share by learning from Apple’s model, with the focus on cost efficiency.

• E-Commerce: Amazon was a first-mover who pioneered online retail and established loyal customers through their innovations in logistics and customer service. Shopify was a last-mover that entered later to help people set up their own e-commerce businesses, having learned from earlier retail challenges.

• Entertainment: Netflix was a first-mover who transitioned from DVD rental to streaming and established itself as a pioneer in digital media. Disney Plus launched later and had the benefit of an extensive content library, insight into Netflix’s early experiences, and better streaming technology.

How to use the first-mover and last-mover advantage as a mental model: (1) know your industry — determine whether your market prefers early and agile innovation or mature and established brands by seeing how customers pick their products and services; (2) evaluate risk and cost — identify how viable being a first-mover is, such as how certain the new technology is to work, versus the costs of entering an already established and voracious market; (3) get in position — decide whether you should aim to pioneer something new as a first-mover or refine and optimize and existing market as a last-mover; (4) plan for the worst — consider how competitors will respond, expecting potential followers as a first-mover, and existing rivals as a last-mover, and develop plans for both; (5) live on the rock — stay updated on tech advancements to determine if your company’s current strategy is optimal.