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Unformatted text preview: First mover advantage First mover advantage First/early mover advantages First/early mover advantages Autoindustry case: cumulative learning Early buildup of brand image, reputation Lock in scarce assets
Relationships with suppliers, users Location, location,… Distribution channels IPR monopoly rents Network externalities (=increasing returns to adoption) Imitability Imitability Is it possible to protect the key asset? (= is it difficult to imitate) Yes No get in early if competitors exist: winner may take all If no competitors exist, can enter later wait until uncertainties are reduced Whether and When to Enter?
Will Mitchell studied 30 years of data on whether and when an incumbent in one subfield of the medical diagnostic imaging industry would enter another subfield. He found: If only one firm can produce an inimitable good, it can enter if and when it wants. If several firms could produce a good that will subsequently be inimitable, they race to capture the market. If good is highly imitable, firms prefer to wait while others invest in developing the market. Firms were more likely to enter if they had specialized assets that would be useful in the new subfield or if their current products were threatened by the new subfield. Firms entered earlier when their core products were threatened and there were several potential rivals. FM Disadvantages FM UNCERTAINTY Cost and effort of developing value network (suppliers, manufacturing, distribution…) Lack of complementary products and services Demand: volume, timing Customer preferences Technical (cost and feasibility of development) First movers need deep pockets First movers need deep pockets Product development cost Costs of creating the market Advertising Alliances Other marketing expenditures Building complementary assets Creation of enabling technologies Creation of complementary goods and services Fig. 5.1: First Movers and Followers Fig. 5.1: First Movers and Followers – Who Wins? On balance On balance Being first mover is risky, but may have high returns Returns are highest if IPR, users, or suppliers can be locked in. There are ways to manage the risk, but need to have deep funding or diversified portfolio Often the early followers take the market But innovative entry after a dominant design exists is tough Management of uncertainty related Management of uncertainty related to early entry Market experimentation + quick feedback cycle Parallel development process rapid innovation Alliances, joint ventures with complementors, suppliers, customers, rivals, Spinoffs, acquisitions, corporate venturing Switching from current technology Switching from current technology to the next Competenceenhancing or competence destroying innovation? Architectural or component innovation? Incumbent or entrant? First mover advantages or not? PDA industry PDA industry Who were the first entrants? When did shakeout happen? Why? Who survived? Why? ...
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- Spring '08