Clarity Tip Sheet...

How to Obtain Market Leadership Even If You Were Not First Mover

Many companies kid themselves that, since they were not the first in the market, they are not, and cannot become, market leaders.

But does market power always depend on having been the first...?

You’ve probably been coached endlessly about the importance of being the first in a marketplace. To become market leaders, they say, we have to be first.

But do you really accept that as the ultimate truth?
It’s no wonder if you do, because practically all strategy and marketing management books emphasise the concept of “first mover advantage” - i.e. the significance of being the first with a product in a market.

However, just looking at the ruptured would instantly make you think again. In that connection, it cost many millions to be “first mover”, and those investments have, for the most part, been lost.

The short of the long is, that it’s never a good idea to hide behind not having been a “first mover”. Instead, why not reap some of the rewards stemming from what the first mover has sown?

It’s expensive and risky to be first
There are success cases of companies that were first and now control a dominant market share, yielding a high return on investment. When it comes down to it, though, there are more cases of companies that are claimed to have pioneered, but which were actually entering an existing market as number two or three.

Case in point: MITS and the PC
Look for instance at Apple which is often thought of as the company that introduced personal computers. In fact, it wasn’t Apple but a small, unknown American company called MITS. This company introduced the Altair PC but it was not successful and so it is no longer in existence.

Apple has fared somewhat better, but they were not the ones who ran the greatest risk - MITS did.

Going for global market leadership
So, in and of itself, there’s no reason to be first. It’s much better to be the biggest, once the market really takes off. Time and again, it’s been document that really successful companies are global market leaders (or at least amongst the top 2 - 3) in their market.

What does “their market” mean?
There’s an important demarcation to take into consideration, because the overall biggest companies are seldom the most profitable ones. The most profitable ones tend to be the medium-sized enterprises. They tend to have chosen a niche (a comparatively smaller sub-segment) which they serve so well that they thrash their competitors. In this connection, it’s almost always better to go “deeper” than “wider” in terms of products and offerings.

Competitive advantages
Naturally, you can’t compete against other players if you don’t have one or more strengths that provide competitive advantages. In this connection, many companies are fatally mistaken because they forget the important distinction between absolute and relative strengths.

A company can have strength in being financially well consolidated, but if this financial position is not stronger than those of its competitors, it’s merely an absolute strength and not a relative one.

Only relative strengths lead to competitive advantages.

Being close to customers
Most competitive advantage can eventually be offset by competitors, so you shouldn’t rest on your laurels. You must constantly innovate and be at the forefront. However, only innovation stemming from or matching customer needs and requirements help your company to move forward. That’s why it’s crucial to be “close to your customer”.

Having a large part of the organisation in contact with customers makes it more likely that new ideas for ongoing product and process development occur. This, in turn, provides a good basis for continuous development of competitive advantages.

Note the two important concepts: (a) a continuous development and constant improvement, and, (b), development and improvement of not only products but also processes, service concepts, and approaches.

More boldness, less bureaucracy
Do you believe you have to be a market leader to be successful? If yes, does your company have the determination for making it happen? Many will answer “yes” to the former but “no” to the latter.

Becoming the market leader requires serious willpower. Sadly, most companies don’t have it. Instead, they fool themselves into thinking that everything is fine and one day they realise, too late, that their business base has become unsustainable.

Meanwhile, they’ll have built impressive systems, key performance indicators and other gauges to control and manage various things. These systems often relate to redundant and archaic issues which do not truly make a good basis for running the company and taking decisions.

This bureaucracy penchant is the greatest hindrance to companies becoming market leaders.

Have you thought about that in your company?

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