First mover advantage?

I've heard 'first mover advantage' used a few times now in relation to new service launches. Used to make the argument for why it should be done quicker, and to suggest that if you move first you'll get the early success and the largest market share, even when others follow suit. Your name will be synonymous with the new, pioneering, service. Why would they go anywhere else?

In the service industry if you have short term contracts, a broad potential customer base, and it's easy for someone else to copy your service then they will. And when they do, how are you differentiated?

If you have to go through a lot of trouble to get your service off the ground, you'll likely incur losses during this period. The second mover will have you as the benchmark. You've taken the trouble to make people aware of the concept, even if they haven't bought it. The second mover will find it much easier to persuade as a result of your actions.

Just ask yourself, if you're banking on first mover advantage, what will you do when it's gone?

Be bold

Whether you’re dealing with one of your team, an advisor, a potential supplier, ask them this: “Is this what you really think, or is it what you think I want to hear?”.

It’s all too easy to commission a report to back up your point of view. Too easy to work with a sycophant who wants your business or a kind word from you. But what’s the point?

If you really want to create competitive advantage, get double digit growth or make a lasting impression in a saturated market, you need to do something radically different. Be prepared to listen to a point of view that you normally wouldn’t. Don’t be prepared to accept ‘good enough’ or small victories. And don’t fall in to the trap of thinking that just because that’s how you did it last year, that it’s the way you should do it next year.

You might think it’s weak to change your mind, but what’s really weak is to just make excuses when you could’ve done something differently.

You can't benchmark your way to competitive advantage

Benchmarking is an important tool for companies seeking to align themselves with their competitors and avoid falling behind the pack when it comes to industry best practice and market positioning.

However, it is the diffusion of best practice by emulation and benchmarking that also leads to market homogenisation and the erosion of competitive advantage over the longer term.

In performing similar activities and adopting the same techniques as their ‘best in class’ rivals, companies cluster together in a similar market space, competing for a smaller segment of customers and resources¹.

For a market or industry leader to maintain a sustainable competitive advantage, it must combine a strategy of differentiation with continuous improvements in operational efficiency. Due to the inevitable diffusion of best practice down the market, operational advantage is not sustainable².

The advisors, consultancies and outsourcing firms, perpetuate market homogenisation by advising on the latest techniques, improvements and generic practices which lead to greater “operational effectiveness” and profitability in the short term but ultimately, result in a loss of margin and market positioning in the longer term.

So a key question is can we, as Turnaround professionals, help clients to improve their operational efficiency, productivity and earnings in the short term whilst also helping them to develop or maintain a strategy that leads to competitive advantage?

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Thanks to Chris Pay for this post.

Notes and further reading:

1.       Nattermann, P. (May 2000) “Best practice does not equal best strategy”.  Mckinsey Quarterly.

2.       Porter, M. (November 1996) “What is Strategy?”. Harvard Business Review, Volume 4, Number 6, p.61-78.