Business schools teach that being first to
market is a desirable strategy. The ability to be first to market
occurs when there is a disruptive technology or a new emerging market
requirement. When either occurs incumbent manufacturers are typically
slow to address the new opportunities. The reasons for this are numerous
and include the management of day-to-day ongoing operations, an investment in the
previous generation of technologies and the initial small market size.
New entrants to the emerging market have an initial advantage for the
mirror image reasons. Namely, they are not dealing with day-to-day
issues, they do not have an investment in the current generation of the
technologies and the initial market size can justify the investment to address
it. However, the high tech environment is littered with companies
that have adopted this strategy. This article will highlight the primary,
and in some cases counter intuitive, reasons why this occurs.The article will not address the situation where a company creates a new market where there are no comparable options. Also, I am using the term “product” to describe a unit that an end user, enterprise or consumer, acquires. It could be a hardware product such as networking device or other IT device, or a software solution such as a CRM solution or source code management system. While applicable, in some cases to consumer products, the primary focus in on business to business, B2B, marketing.
The first to market strategy is appealing on the surface for a range of solid reasons. First, new entrants can react fast to new and emerging market requirements. They can start with the proverbial blank piece of paper and develop a product that addresses these newer requirements. These products can also be developed with the latest generation of merchant, or off-the-shelf silicon, and/or latest software innovations. This should provide a cost and/or performance advantage.
In the B2B area, whether service provider or enterprise, the sales cycles can range from 6 months to 36 months depending on the complexity of the solution. In each case, the existing production infrastructure is producing revenues either directly as in the case of the SP, or indirectly as in the case of the enterprise. A typical deployment cycle starts with a lab test, followed by a field test or pilot program, followed by a limited rollout, the finally to full scale adoption and deployment.
Being first to the lab trials gives the vendor advantages. First, they establish personal relationships with the key personnel involved. Second, they learn firsthand what the desired requirements are for both their product and for the larger system and they can influence both. Third, they are well suited to be the first vendor in the next phase of testing. However, that said, being first does not mean being the finalist.
The risks of being first to market are significant. First, incumbent vendors already have relationships throughout the large customer organization. They are in the system. Meaning they have a history of delivering products, supporting products and getting paid for products. Second, with these relationships they are learning of the new products desired requirements at the same time as the new entrant. Since they do not have a first generation product, they can begin developing their product based on the real requirements and on what the customer has learned about the first generation product, both the good and the bad.
