When a company blazes a new product or service trail and establishes an early market presence, long-term value is sure to follow, right?

Conventional wisdom holds that being first to market gives a company a significant competitive advantage. It creates an opportunity to entrench a new product, lock in customers, and dominate market share to net higher returns.

But being first doesn’t always pay off, and plenty of first-to-market strategies fail for several reasons.

For one, being first requires a commitment to a business model that may ultimately prove to be misguided or unsustainable.

Additionally, companies sometimes rush to market with imperfect products or services and insufficient experience or market knowledge. As a result, the offering doesn’t deliver on all of the promised benefits, customers give it a lukewarm reception, the pricing is off, or the inability to mass-produce the product or replicate the service dooms the introduction.

While a first-to-market mindset still drives most businesses, companies should take a more realistic view of both the advantages and the risks before pursuing such a strategy.

The advantages

Pioneering a new product, a new brand, or a new industry does have rewards. Being first may be particularly vital to the survival of some of today’s fast-moving, technology-driven industries.  Here are a few of the key benefits to beating out latecomers.
 
Defining the market. Being first means being in an enviable position of capturing consumer mindshare. Those out in front have an opportunity to literally define product categories and cement brand distinction, making it all the more difficult for competitors to carve out market share.   

Locking down resources and assets. Early commitments to suppliers and distribution channels can produce cost and tenure advantages. First movers also create a preemptive strike in geographic territories and in market niches.

Achieving the technical “tenure track.” Having “been there, done that,” a company attains key learning curve advantages. What’s more, original innovations may be protected by patents further strengthening the positions of first-movers.

Owning the market, at least temporarily. There’s a window of opportunity whereby first movers are the only game in town, without competition. That window closes fast, however, and companies need a plan to leverage their first positions before the market becomes crowded.

The risks

Deciding when and whether to go first to market is critical to long-term survival. Therefore, companies should take into account a number of risks and uncertainties. The three greatest of these are:

Facing technological uncertainty. Companies breaking new ground with product features and functionality are in essence creating new standards for their industry and may not be able to succeed during the formative and evolutionary stages.

Incurring a greater financial liability. Funding for prototypes, development, market research, and mass production is costly. There are advantages to being second-to-market, namely benefiting from another company’s investments in research and development.

Opening the door for followers. Competitors can learn quickly from your example – and even more quickly from your mistakes. Your technology and innovations may create fast openings for newcomers and copycats. This is also true for any marketing inroads you’ve created. Followers inherit an audience of educated consumers, thanks to you.

The realities

Strategic success depends on so much more than simply being first. Here are some truths that also influence first-to-market outcomes.

Technology isn’t always the victor. Sony’s Betamax was technically superior to JVC, but JVC gained the sustainable competitive advantage through better management and marketing choices.

Better leadership matters most. A head start in a race isn’t helpful if you aren’t already a strong athlete. Companies need a vision to propel them, a deep understanding of the marketplace, a strong management team, and a persistence to succeed.

No team can win consistently on offense alone. A strategic competitive advantage doesn’t necessarily equate to a sustainable competitive advantage. Companies must know how they will fend off followers and nurture their resources to protect their frontrunner positions.

Look before you lead

Some industries naturally favor companies that execute a first-to-market strategy, while others routinely award the higher margins to second-comers or even later entrants. Regardless of the industry, a company must weigh out all the risks versus the rewards in order to achieve longevity as a successful first mover.