The Last Mover Advantage

We live in accelerated times. As the threats and opportunities of new technologies come at us faster and more frequently, will the new business environment continually favor the new entrant, and what does this mean for the largest companies of today?

Moore’s Law has increased not just the power of computing, but the rate at which computing technology now affects society.

In this environment with its constant redoubling of the speed of technological innovation we comfort ourselves by saying that change has never been so fast. But we should note that things will never be so slow again.

When things change rapidly first mover advantage vanishes and being able to build with the best, cheapest, newest technology gives the competitive edge. Yet the same improving conditions ensure your success is at risk from others who develop later.

Could you replicate Uber today for a fraction of the cost after it’s paved the road to follow? What makes us so sure that SnapChat is destined to last when it was able to rise so quickly? What if the absence of assets of any nature allowed rapid scaling, but also hastened a rapid demise? Is the business of the thinnest ever companies at risk from the most fickle user base we’ve ever known?

The Burden Of Legacy

We love to think of America as the ultimate in early adoption, Its airports were built excitedly for travel in the 1960’s, its urban environment constructed on the assumption of near endless cheap gasoline and its malls provide the optimum solution for retail in an unconnected world. America was the perfect output of policies, decisions, infrastructure of the foundation of a pre digital, disconnected world – no wonder disruption feels more disruptive here than developing markets.

America has always emphatically and excitedly embraced innovation, but increasingly this is to its detriment. A landscape of paper banking checks, crumbing roads, a terrible cable TV environment and sluggish internet bares testament to investment in early iterations and the desperate ham-fisted protectionism and lobbying that despairing incumbents fight with. America embodies the complex contradictory nature of being the first, it’s both in the driving seat and embarrassed by upstarts from around the world.

The quote from William Gibson that “the future has arrived — it’s just not evenly distributed” reflects more accurately than ever on a world that chooses to embrace new technology at different times.

Shanghai’s 500mph maglev train, Romania’s parking via mobile operator billing, and the fact that the Czech republic has some of the best internet speeds in the world all speak to the uneven distribution of progress in the post-modern world. This era sees emerging markets become technological marvels where the Philippines can be one of the first nations with 4G, Ecuador may be the first nation based on a digital currency, and Estonia is the first with Digital residency.

First Mover Advantage

Like nations, businesses want to be the first: the first to bring in customers; to maximize lock-ins; to steal market share through this first mover advantage. Early business practice taught us that In everything from patents, to infrastructure like railways or canals, to prospecting and exploration in mining and even Internet domain squatting, the early bird catches the worm.

Perfect Mover Advantage

Yet times changed, in the next wave we learned to chase users not customers. Contracts were never signed, growth trumped profitability and from early electric cars, Segways, and websites like Six Degrees or services like Webvan, we saw the stumbling start of great ideas that were ahead of their time. We learned that when starting a company being right and too early is the same as being wrong.

In retrospect, the time from 2000 to around 2010 was the era of the “Perfect Mover Advantage”. Facebook, Linkedin, Google, Twitter, Groupon, Uber, Alibaba, and Spotify are some of an array of companies attached to the most lofty valuations that were never first, but always the best timed.

Business in this era was like riding a wave, timing the crest was by far the most important thing. For a while it felt like Silicon Valley in this decade was the perfect time and almost the only time for the next generation of companies to dominate our lives.

The Last Mover Advantage

Network effects were vital in building these companies, Facebook, LinkedIn and Yelp’s and many others success relied on Metcalfes law, but when our mobile phone became our address book, network effects came more easily.

It feels like the combination of fast free data, ample venture capital money, low interest rates, easy outsourced labor, ever cheaper hosting costs, improvements in processing power, make new companies easier to scale than ever before.

We’ve seen WhatsApp, SnapChat, Instacart, Slack, Transferwise all rising to multi-billion dollar valuations in less than 5 years.

Where does this end and what is the ultimate future scenario for this trend?

Digital nostalgia develops so fast that we consider Facebook to be a given in any future scenario because much as we can’t remember life before Facebook, we can’t imagine life without it. Yet what guarantees Facebook a part in our future? Imagine how much cheaper it would be to replicate Facebook today than it was to build from scratch.

The rapid rise and fall of Ello, Yo, and Secret shows us how quickly and how increasingly things change. Nothing deserves it’s right to exist.

In a world where the possible becomes more remarkable and easier everyday, it’s always best to have been built only with that new possibility at the core.

This is the age of Digital Darwinism, where technology and society evolve faster than any organization can adapt. The best advantage you can leverage is being built for the newly possible.

Apple is likely the last company to introduce NFC and has sat back to learn from wearable’s failures.

So how do companies respond?  Perhaps succession management in companies should no longer be about grooming a replacement but creating new companies or products to take over the role of the establishment for the future.