By Ian Ortega
We all grew up with the adages such as ‘latecomers eat bones’, ‘the early bird eats the worm’ and many of the kind. In the business world, it would thus birth the idea of the First Mover’s advantage. That there existed an advantage for the first entrants in a market, industry, category, the firms that were quick to spot an opportunity, grab it before others entered the same market. For many years, everyone took it for granted that the first mover had the advantage.
Over the years, there has been a re-education, a realization that those late to party get to stay the whole party. That the first mover often achieves a pyrrhic victory, the kind that comes at too much a cost. That the second, third entrants end up achieving similar success at a less cost. It’s the agreement that if first mover advantages exist, then equally, disadvantages do exist for this first mover.
And this is truer in emerging markets where the first mover must carry the weight of novelty. One could spot an opportunity for ice-skating in Uganda and thus proceed to build an arena for that. But it’s not a sure guarantee that they will own this market. In a previous article, there’s the gap between value creation and value capture. Those who create the value do not capture all that value; other firms get to capture this value.
If you introduce a new category, let’s suppose – sports drinks in the Ugandan market. You carry the weight of education the market about sports drinks. Yet, once you’re done with this education, other cheaper, more efficient players will enter the same market and enjoy the fruits of your education.
The idea I am stretching here is that there’s something that misses our eyes – the latecomer’s edge. It is for firms that may not have the capability to move first and fast into an opportunity, it’s to realize that if you are not first, then how do you capitalize on this latecomer’s advantage?
The latecomer has a shorter learning curve; they do not have to go through the cycles of reinventing the wheel. For example, in the rush to adopt Artificial Intelligence (AI) across organizations, the late comers to the parties will find that they will make better adoption decisions. They will adopt AI platforms that have been tried and tested by the first movers and thus make better investment decisions. A latecomer can avoid the disastrous or risky paths taken by the first mover; they move with more certainty. The latecomer learns from the mistakes of the first mover.
For every successful firm, you often find that there was a smaller first mover that just didn’t make it to the big party. For example, there was Myspace before Facebook happened. It’s also evident in marathons where the leaders of the packs do not end up as medallists, it’s those who trail closest waiting to sprint in the moments where it matters.
The latecomer’s edge also lies in asset-lighting. That’s to say, the latecomer doesn’t have to adopt the same robust, heavy technology of the first mover. The latecomer can always do more with less. The first mover carries the curse of sunk costs; they invest and lock themselves in certain capex corners. For example, if you are a first mover and you purchase a juice-packaging line from Italy, and a latecomer comes in, purchases an affordable, more efficient line from China, with a lower full cost of ownership. This means, the latecomer has the pricing edge, they can play pricing tactics and edge you out of the market.
The point here is not to say that firms should rest on their laurels and fail to grab opportunities just because they could be the first in the market. It’s rather to say, that once you find yourself in the fix of a latecomer, then you can play it to your advantage. Rather than panic and try to play catch up, latecomers ought to play to their strengths.
And to also make it clear that latecomers do not always eat bones, in most cases, they survive poison. And the bigger firms have learned to be the latecomer. You let the small firms test new waters. And if the waters are safe enough, the big firms capitalize on their capacity and move into the same waters. Because the bigger firms can always deploy a new technology in the market faster than the smaller firms.
At a country level, we’ve seen this discussion play out as developing countries pursue the industrialization game. Countries such as China have provided the templates for industrialization for latecomers. The latecomer doesn’t have to invent from scratch; they can borrow already successful technologies and innovate on top of that. It’s the same growth story for the Asian Tigers, that those late to the party can always bring a new dynamism to the party, a fresh pair of eyes to doing things. Thus, the wisdom from the good old book may hold true – ‘the first shall be last, and the last shall be first.’ It all boils down to the latecomer’s edge.