When being “first” is not a competitive advantage

“WE STARTED THE TREND”

“Wherever you hear companies talking about Managed WordPress Hosting, they are following our lead.”

This is how one of our competitors attempts to differentiate and compete with us at WP Engine. Is it effective?

Most startups insist they’re “first” at something. As they should — what’s the point of a new company that adds nothing new to the world? But is it a good thing? Does it make you better than your competition?

On the surface being “first” sounds impressive, implying innovation and leadership. But upon reflection, it’s not.

Google wasn’t the first search engine, the iPod wasn’t the first mp3 player, DropBox wasn’t the first cloud filesystem, Lotus wasn’t the first spreadsheet, Dell wasn’t the first PC manufacturer, and Cisco didn’t invent the router. Yet they are the market leaders. Indeed, their market’s greatest innovators.

Being first does imply innovation, but also faults and weakness. The first electric car, while impressively innovative, was pretty bad by most standards — short-range, sluggish, unattractive, and constantly in the repair shop.

So too with software — “v1.0″ might imply novelty, but it also implies “buggy” and “incomplete.” Who wants their business to depend on a v1.0 product?

Even if you consider WP Engine to be nothing more than an imitator of this competitor (we’re not, but that’s a story for another time), the electric car analogy is apt, because in fact we’re an improvement in almost every way. We’re not the first electric car; instead we’re Tesla.

This competitor had 40 minutes of downtime last month; we had 0 (according to Pingdom, an unaffiliated 3rd-party). We’re 30% faster at delivering HTML (also Pingdom). Our security service is better — we guarantee cleanup of any hacks while this competitor simply claims they’ve never been hacked (though we’ve found malware in customers of theirs who switched to us). Our support is more responsive and knowledgable because we employ more WordPress experts per 1000 customers than anyone.

Those are tangible competitive advantages; being “first” isn’t.

In fact, being first is a shackle because you’re stuck with legacy support — features you thought were important but aren’t now, grandfathered customers who are no longer profitable, and a reputation that’s hard to revamp even if your company has in fact changed.

Worse, being first means you make all the mistakes in public, for all to see. New competitors get to swoop in afterwards with the hindsight that you created — in pricing, positioning, marketing, features, design, … anything. They get the running start without all your baggage.

Of course there are situations where being first is indeed a massive advantage. This exception arises when you’re not only first, but able to expand fast and continue innovate. Early mp3 players didn’t do this — they didn’t get huge traction and weren’t creative in hardware or design, which meant Apple had the space to innovate in design while the market was still largely available.

But McDonalds and Ford were first and kept their leads, because they never stopped innovating in process and product, constantly driving down costs while adding new desirable features, using their lead to fund even stronger growth.

Amazon is the quintessential example in the hosting industry. They didn’t just put “cloud computing” on the map, they’ve never stopped lowering prices while expanding both depth and breadth of service. If they keep it up — and there’s currently no reason to think they won’t — it’s hard to see how anyone could overtake them. And so far no one has come close, though at least four multi-billion-dollar companies are trying.

So yes it can work, and a well-funded startup combined with a stellar team and bit of good fortune can occasionally pull it off. But most little companies aren’t in that position, and it’s often not the best risk/reward position anyway.

What this means is that being “first” isn’t an end in itself — it’s not an advantage, not a feature, not a benefit the customer can experience. It’s a means to one of those ends — it can be levered into market dominance or it can be a manacle that locks your company inside a box.

It’s OK to be proud of being “first” at something, and you should be. But like being “disruptive,” being “first” isn’t necessarily desirable.

In any event, it’s not a competitive advantage. It’s just history.

Let’s continue in the comments — when is “first” a benefit or a drawback?

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  • Neil

    First!

  • http://isthecustomeralwaysright.com Neil

    Don’t mean to nitpic, but wasn’t GM first and Ford second?  I’m pretty sure Henry Ford left GM to found Ford, but I could be wrong.

  • http://twitter.com/overci Jay Jacobson

    This is spot-on. In 2006, I wrote “First-Mover Disadvantage” along these same lines. http://kinetic.org/blog-posts/first-mover-disadvantage.txt  First is good for your ego, but generally bad for your company. What matters is being the “first to do it right” and best address the pain in the market.

  • http://patrickfoley.com/about Patrick Foley

    A two-comic day – cool!

  • http://www.globalfibernet.com Kevin @globalfibernet

    Being first is an advantage when it is utilized to power the cycle of innovation. “We are first in the X business, which funded our development into X technology, the helped mold us into the competitive company we are today. ” Any company that rests on its laurels (sorry for the old-timer catch phrase) in anyway, whether it be ‘first’, ‘disruptive’, or ‘latest’, is destined for the fast track to ‘was’.

    Any of those elements are assets to be utilized by a company. But if they are only used as advertising copy, then you can replace them with any other ‘sale’ and move on to the next company.

  • http://www.approachab.ly Luke

    reminds me of LIFO inventory accounting. Last-in, First-out. maybe this concept applies, maybe not: http://en.wikipedia.org/wiki/FIFO_and_LIFO_accounting

  • Doug Gibbs

    The second mouse gets the cheese!
    Pioneers are the ones with arrows in their backs.

  • http://www.about.me/briankung Brian Kung

    I like to call it Second Mover Advantage. They get to iterate off an existing product without the development expenses of the true pioneers. One of the most costly expenses is educating the marketplace about what kind of product it is. If it’s truly new, there’s a lot of inertia against it, whereas a Second Mover gets to ride the momentum that the first to market had to fight to create.

    • http://www.facebook.com/people/Matt-Sharper/100000807088310 Matt Sharper

      so so true its like your saying ” hey thanks for validating a market for me!

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  • Jonathan Baldwin

    The obvious solution is to iterate, not innovate. (where “innovate” is translated as “be first and rest on that laurel”). The thing is, innovative doesn’t mean “be first” it means “be better”.
    The examples you give of Ford and McDonalds are iterative. Apple iterated on the MP3 player and continued to do it. They do it with computers and phones – incremental improvements, constantly. Their innovations are constant not one offs

    It’s okay to be first so long as you are also second, and third, and fourth…

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  • http://twitter.com/jkeramidas Jason Keramidas

    If you haven’t already, check out Tellis & Golder’s work on the myth of first mover advantage: 
    http://www.amazon.com/Will-Vision-Latecomers-Dominate-Markets/dp/007137549X/

  • http://www.johnmcfarlane.me.uk/ John McFarlane

    Worrying that the competitor claims they’ve never been hacked when the reality is that they either didn’t know about the vulnerabilities or did and possibly ignored them, or delayed sorting them.

    • http://blog.asmartbear.com Jason Cohen

      Yep, security is like speed-optimization — you push to improve but there’s no such things as “perfect.”
      Of course you do what you can to prevent, but the real test of “service” is what happens when your prevention isn’t good enough.

  • http://twitter.com/_garrilla Garry Haywood

    There are two issues here. First is implied in the blog: its not the position at which you enter the market, but your position on the market leader board. FMA is only an advantage if you can use entry position to dominate the leader board. 

    Second, in a co-evolutionary competitive environment the whole market might be suboptimal because as each company competes to maintain position rather than improve the market. Perfect imitators may be operating a false flattery. See the Red Queen Principle.

    • Mitul

      @twitter-210155984:disqus, the two points you made are correct technically and according to historical analysis of markets.

      However the internet turns a lot of these on its head. If I am producing a product that will end up on a supermarket shelf and is a new type of product which is indeed first in its category, your points apply.

      In terms of Internet businesses, the points don’t apply as much. They are not irrelevant, but just not that big an advantage.

      Experience of running an Internet business is an advantage if there are pitfalls that cost time and money and are not visible to others. However on the Internet things become public / obvious faster and others can learn from the way you grow and how people use your services / products.

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  • http://www.facebook.com/marcin.coles Marcin Coles

    Fully agree – the ‘being first’ thing is like writing marketing copy about technical features rather than customer benefits – it feels good but doesn’t matter.

    Being the first only benefits customers while there is no no.2.  Once no.2 comes onto the scene, you’d better hope that the experience you have gained from being in the trenches is more valuable than the externally visible marketing/pricing/positioning/etc benefits coming to no.2.

  • Mike

    your blog is awesome !

  • Igor Prochazka

    Being the first one surely isn’t a clever marketing argument. However, being (at least among) the first can help you making a lot of money. Those who were riding on the first waves of ringtones, J2ME games  and iOS Apps made fortunes. Try entering those overcrowded markets now.

    • http://www.facebook.com/people/Matt-Sharper/100000807088310 Matt Sharper

      ofcourse i can enter the iOS market because i am second… as the article stated being first does not mean anything…. the bar has just been set higher e.g i once saw a blog about a ios devloper complaining about how their app was not selling well they where charging 2 dollars and it was something you could literaly get for free ont he internet ( think new website) THOSE days are over THOSE markets are crowded…..

  • Randy Streu

    There is a book called “The Evolution of Useful Things” that talks about all sorts of things (including paper clips and the number of tines on a fork) that essentially describes this very thing for almost everything we invent.  Someone has the original idea.  Someone else often makes it great. 

  • http://www.sahilparikh.com Sahil Parikh

    Good one! With the cost/time of starting a business gone down (drastically) I think what people need to concentrate on is “value”. There are just too many apps/products etc. coming to the scene so sometimes I don’t even care who is first. I just want to know that they are solving my problem. 

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  • http://www.fazteck.co.uk/ INk cartridges

    great post. you share some great points regarding that with us. thumbs up for you and your post. I acquired lot of useful points from here.

  • http://www.electriccarsdaily.com/ Jeremy Page

    Very interesting perspective, one that I hadn’t really heard before.  There is a classic marketing book called “The 22 Immutable Laws of Marketing” and this really goes against it.  I guess their take was, if you can’t be first in a given category, invent your own category.  Not saying one perspective is better than the other, just good to see both sides I guess.  

  • http://www.ventasuper.com/ super sale

    I think Jonathan provides a great answer to these issues. thanks for sharing it with me. i acquired some great learning points from here. 

  • Mroberholzer

    Very thoughtful post. There certainly is a difference between being first and being best…both are good (and can be powerful differentiators in their own right), but the combination of being first and best is where it’s at!

  • http://www.socialmediajobsonline.com/ Social Media Jobs

    Steve Jobs built Apple on your  very premise.  He was an innovator of other people’s ‘first ideas” and became the market leader – creating a perception that he was the first to the plate with many concepts.  To be fair, he did have original ideas that spawned off of existing technology.