Why unique business ideas fail and value innovators succeed — busting the myth behind the “first-to-market” advantage

Differentiation. A word that used to keep me awake at night.

In the extremely competitive markets we have created today, answering the question of differentiation is seen to be almost impossible.

A simple google search will lead you to a lot of useless less than ideal articles about how to differentiate your business, such as:

Forbes — How to distinguish your business from the competition

Masterful Marketing — 8 ways to differentiate your business

Many of these articles cite differentiation as being able to specialize in an area, target a niche market and provide unparalleled customer service. Hell, the Forbes article above even mentioned lowering business exposure while building your customer base so your competition stays ignorant? Seriously. What the actual fuck?

I mean to each its own, if it works, fine. But if you have to hide how you are different, I think how you are differentiating yourself might not be worth the time. This is not to say that you need to be “first-to-market”, although, it has been overly glorified in the business community.

And so, I wanted to do 2 things. First, is to debunk the importance of being first-to-market. And the second, is to properly define what it means to be different in business and how to differentiate in a meaningful way.

To do this, here are important questions that will help paint the picture for why our current perception of being “first/different” is flawed.

  1. How important really is it to be the very 1st versus the 2nd, 3rd or even 55th?
  2. So, what does being “first/different” really mean?
  3. How do businesses really differentiate?

How important really is it to be the very 1st versus the 2nd, 3rd or even 55th?

Before going into what is, or how to be, it is paramount to first understand the importance of being first-to-market in a traditional sense.

A research study by Peter N. Golder and Gerard J. Tellis, actually found that:

47% of “first-movers” actually fail

Golder and Tellis were of course looking at businesses that were first-to-market in the sense that they created a new product category or innovation.

Their research even went on to suggest that being “first” did not matter when continuous innovation within a product category was ignored.

They continued saying,

“An alternative strategy worth considering may be to let other firms pioneer and explore markets, and enter after learning more about the structure and dynamics of the market.”

Being “first-to-market” in a traditional sense might be a death sentence. There are so many market forces working against a business that it is most likely to fail.

And that creates an opportunity for other businesses to take a look at their failure, analyse it and improve upon it. The best solutions, products, services, pieces of art, innovations, have been worked upon previous things that existed.

Examples:

  • Xerox > Apple
  • MySpace > Facebook
  • Blockbuster > Netflix (this example is leaning slightly more towards disruption)
  • Wesabe > Mint (Click here to read Wesabe founder write about Why Wesabe lost to Mint) *Spoiler alert*, he talks about how being first-to-market was a disadvantage and how everyone thinks Mint was first-to-market because they dominated the market better.

So, what does being “first/different” really mean?

Now, some of you throughout the article might have been saying, “Oh Sarah, being first-to-market and being different are two completely different things you naive, young-ling. Differentiation: We specialize in the best white chocolate mousse. First-to-market: The world’s only robot AI amazing unicorn.”

Well, I argue, that there are blurring lines between the terms “first/different”. See, Apple, Facebook, Netflix and Mint were all bits and pieces of Xerox, MySpace, Blockbuster and Wesabe, respectively. However, the Apples and Facebooks of the world were “first-to-market” in the way that they created value innovation.

The idea of value innovation is of course not mine, but the cornerstone of the book, Blue Ocean Strategy®. For those who already know about Blue Ocean Strategy, I really urge you to explore the Blue Ocean Shift to truly understand value innovation on a deeper level.

To further explain value innovation, value without innovation is easily duplicated by the competition. And innovation without value is typically technology that is unlikely to become a commercial success.

Which brings me to the question:

How do we really differentiate in a way that matters?

Well there are a lot of tools on the website Blue Ocean Strategy. And while I am not receiving royalties for this blatant advertisement, the core of the Blue Ocean Strategy is compelling to me.

It helps us understand that a compelling business is one that not only chases their differentiator, but they need to chase it in a way that will also lowers cost to open up a new market space, create new demand and service an ignored need.

And that simply means that you are so substantially different that competitors simply can’t compete with you. It is a space you created and now service.

Enough theory.

For example, in 2014, Kimberly-Clark used need finding strategies to understand two things.

  1. Customers found it hard to carry a huge thing of toilet paper
  2. Customers liked eco-friendly products.

They used these two insights to drastically lower the cost of their products by essentially taking out the cardboard from the middle of toilet rolls, using recycled paper and packing the toilet rolls more effectively (essentially squished up).

So firstly, it was easier for customer to manage toilet roll packaging (carrying, transporting, storing) which delivered huge value. And secondly it cut down the price of material usage and optimized how much toilet rolls could fit into delivery trucks. This carried huge cost savings to the company.

Here are plenty more examples that regularly blow my mind. I really do urge you to read through them and better understand how to build a business past just the technology.

Nintendo’s Blue Ocean Strategy: WII

CitizenM

How Wawa seized new growth in the retail industry

QB House

And the famous Blue Ocean Strategy example — Cirque De Soleil

And, so I hope this will reframe the way we all think about being “first-to-market” and differentiation. I know it has helped my team greatly in being more confident about our product.

Other Notes: Approaching Blue Ocean Strategy in real business

One thing, however, that I feel the Blue Ocean Strategy did not emphasize was the fact that what a company believes to be value for customers, might not always align with what a customers perceives as value. And so design thinking and properly uncovering needs is huge here.

And in that sense, I do not advocate working based on one business concept/strategy altogether. I strongly feel like there is a mix of concepts we need to consider that makes the most sense for our business, whether it may be Design Thinking, Blue Ocean Strategy or the Lean Startup, etc.

Another very important factor is that because you are tapping into a market that has never been addressed before, how does that affect your distribution channels? Creating a new space and new demand also means driving awareness, education, and changing your adoption strategies according to your newly defined customer based. And that is no easy feat.

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