The Myth of First-Mover Advantage10 Comments Latest comment by: Paul
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Intuit is one of the very few desktop software companies to stare down Microsoft at high noon with guns blazing, and live to tell their story. They went head-to-head against Microsoft on three of their flagship products and beat them resoundingly all three times! Quicken beat Microsoft Money, QuickBooks beat Microsoft Profit, and TurboTax beat Microsoft TaxSaver.
How did they do it? I was recently re-reading Inside Intuit, an excellent book by Suzanne Taylor and Kathy Schroeder that chronicles the exciting and educational story of Intuit.
Intuit Had The 47th Mover Advantage!
In that book the authors recount a joke by the founder of Intuit, Scott Cook, who says that they had the 47th mover advantage in their category ('personal finance' software) when they launched Quicken in 1984! That is, there were 46 other vendors selling personal finance software largely similar to Quicken in functionality.
"First-mover advantage" is a term widely used in the high-tech industry, especially by those in product management and marketing. This advantage is often presented as one of the most worthwhile goals to shoot for.
The pitch goes something along the lines of - "By releasing product (or feature) XYZ by Q2 of 2006 we will achieve the first-mover advantage. This will enable us to capture the largest market share, tie up partnerships, erect huge barriers to entry and leave the competitors in the dust...".
That sounds reasonable, right?
Who Made the First Commercial PC?
Yet, the annals of high-tech history contain remarkably few companies which translated their first-mover advantage into long-term dominance in the marketplace. Let us look at a few examples.
Do you know which companies launched the first commercial versions of:
- Personal computer,
- Word processing software,
- Web browser, and
- Internet search engine
Today, none of them is the market leader in those categories or even anywhere near the top - despite the fact that all these products were introduced just 15 to 30 years ago.
(In case you're curious which companies were the first-to-market in these categories, please see the bottom of this article.)
How Intuit Succeeded & You Can Too?
A question arises naturally: If being the first-mover in a category can't get you market leadership, then what can? How did Intuit do it?
In Inside Intuit, Taylor and Schroeder recount in detail how Intuit made Quicken into a big success in spite of being the 47th entrant in its category, and how it has since replicated this success with QuickBooks and TurboTax as well. Boiled down to its essence:
Intuit has consistently and cleverly used customer insight to build its breakthrough products, customer service, and marketing communications. Intuit pioneered customer research in the software industry with methods borrowed from Scott Cook's alma mater Procter & Gamble including: follow me home studies, usability research, and customer advisory panels. (emphasis added)
Customer-Driven Innovation = Success
Intuit has succeeded repeatedly by focusing maniacally on deeply understanding its customers and using that customer insight to innovate in products, customer service and marketing. What can you learn from this?
If your company is not the first entrant into a category - do not despair. Focus on customers, understand their needs deeply, and create products and services that meet those needs much better (in ways that matter to customers) than any of your competitors.
If you can do this repeatedly over time, odds are quite high that you will grab market share at the expense of most of your competitors. And may be even achieve dominance like the market leaders shown below!
First Movers vs Market Leaders
- Personal Computer:
- First Mover: Altair (1975)
- Market Leader: Dell (2006)
- Word Processing Software:
- First Mover: WordStar (1979)
- Market Leader: Microsoft Word (2006)
- Web Browser:
- First Mover: Mosaic (1992)
- Market Leader: Microsoft Internet Explorer (2006)
- Internet Search Engine:
- First Mover: Excite (1993)
- Market Leader: Google (2006)
About the Author: I'm your author, Michael Shrivathsan, an expert in product management and product marketing with successful experience spanning two decades. I live in Silicon Valley, USA. For my day job, I manage the product management & marketing teams at Accompa, makers of requirements management software and product management tools.