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The half-truths of first mover edge

www.livemint.com | September 9, 2019
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Making an early entry into a new industry or product category gives any startup a head start but doesn’t guarantee success; it’s executing at scale that spells a real win

The startup life is synonymous with innovation and pace of execution. But success, like in most other fields, doesn’t come easy, even if the product being offered is a first of its kind. Ask any of the founders who launched a new, even unprecedented, service in a market. Do they automatically become winners because of no competition or, in other words, first-mover advantage, or do they have to do more than the average amount of work?

“Whether you are the first mover or the second or even fifth, it does not matter if you are ahead of the time. The real question is, are you launching your startup in an area where there is or will be actual demand," says Mohit Saxena, co-founder of InMobi, a global provider of enterprise platforms for marketers.

Saxena, along with Naveen Tewari and Abhay Singhal, started InMobi as mKhoj, a simple mobile search engine in 2007. “Everybody liked the product, but advertisers were not ready to pay for it. They wanted it for free. We had to get back to the board to figure this out. So essentially, it is more important to have demand than to just be somewhere at the right time. If you have demand, being ahead of its time can be a huge advantage," believes Saxena.

But if the market is not ready for it, can demand be created? Prabhtej Singh Bhatia, founder and chief executive officer of craft-beer brand Simba, believes that demand is the biggest motivator for a startup’s success.

“We were launching home-grown indigenous craft beer in India for the first time. Yes, India didn’t have craft beer then. But the people we were targeting were well travelled, those with discerning tastes. This is where our opportunity lay and we worked around that, even if it took longer," says Bhatia.

His strategy was to not try to fix everything. A few things at a time and keeping the learning curve short is what, he says, made it possible for Simba to survive. “The product needed evolution. But the distribution was fine. We didn’t want to disturb that model. First, we did contract manufacturing for our brewery, we learnt the ropes, spent time and money on it. In the end, this model made us more sustainable."

Where problems lie

Understanding a problem and finding the right solution is a vital part of enjoying a first-mover advantage, says Amisha Jain, CEO of Zivame. Started in 2011, Zivame was the first brand to make lingerie available online.

Bringing the market online meant the brand had to first educate customers that it is possible to buy lingerie on the net. “We realized that most people had a poor shopping experience while buying lingerie offline. Either the fit was wrong, or the size was not available," explains Jain. This is when Zivame started getting products made under their brand name. In 2015, the brand decided to make their products themselves. Today, almost 95% of Zivame’s revenue comes from its own brands.

Clearly, a founder’s job for creating a successful startup doesn’t end by having a first-mover advantage. Their job is also to identify risks through the stages of product development to scaling up and then mitigating them. “Having a strong group of product and business advisers that keeps the startup on track is an effective way to overcome growth challenges. Identifying and onboarding investors who have helped similar stage startups scale up in similar space/geographic region is crucial too," says Darshan Doshi, director of the FLAME Centre for Entrepreneurship and Innovation, the entrepreneurship centre at Flame University, Pune. “The startup founder has to be passionate about solving a challenge and not just mitigating the risk. The ecosystem has to be evolved. And you must be flexible—must be ready to pivot in case the business requires it."

Creating a market

Pivoting a business model may sound comparatively easier today, but imagine trying to create India’s first e-commerce platform in the 1990s, when the concept was foreign to many.

Serial entrepreneur and author K. Vaitheeswaran believes being the first mover means having the responsibility of creating the market as well. When Indiaplaza started in 1999 as Fabmall.com, the team had to walk in to music stores, get the jackets of each CD and manually enter information to create a data bank. Things like metadata were unheard of back then. No one would have one-day deliveries of products, so they tied up with Blue Dart for product delivery.

Essentially, the team had to figure out the product, the business model, and every other aspect of it, and build the market as well as the ecosystem for it to survive. Despite surviving the dotcom boom and the global economic meltdown, Indiaplaza shut down in 2013. “The first mover spends an enormous amount of time and money to figure out which are the movable parts of the business and then try to move them. So anyone who came after us, not to take away any credit from them, had already had the groundwork done for them," he says.

That said, Vaitheeswaran does believe that the first-mover advantage does exist, but it is more pronounced in non-tech driven industries. “Technology is impersonal and ruthless. It does not care if you have spent months in figuring out a solution. If someone comes and replicates the same product, there will be competition just as much. But in, say, physical retail, you might be the first to start a certain product, and it might be difficult for others to build trust which you have built over the years," he adds.

The other challenge is finding the right team. Vaitheeswaran had to explain to probable hires the retail brand they were hiring for would not be in A or B or C location, but would be an online space.

Jain says finding a co-founder who can excite people to work with you is the first step to convincing your customers. “This means that others are buying into your idea. It is a quick proof of concept whether it will work. Competition is also a mark of that—it only happens when others see potential in your idea," she says.

Being the first mover then might not mean that you become a winner. History knows that many first movers shut shop, and the industry remembers only the biggest players in the market.

As Doshi puts it, the first-mover advantage is overrated. “The right question to ask is: Who is the first to execute at scale. There are many examples on either side of the discussion, those who have scaled successfully after being the first to the market and many others who have been first to the market but have not been able to scale or survive past a few years. The challenges involved in educating the market on innovation and transitioning from early adopters to the masses requires resources. Moreover, a startup requires a different engine to scale up from early stages to what is required to operate at scale."


(Source: https://www.livemint.com/mint-lounge/business-of-life/the-half-truths-of-first-mover-edge-1568051672507.html)