Google Blog - No More Startup Myths

Trying to Fail Fast to Succeed Sooner? STOP!

Ever heard of the ‘fail fast to succeed sooner’ motto?

If you’re into startups I bet you do…

Originating in Silicon Valley, this phrase has not only become classic business advice, but over the last couple of years, it has even evolved into an international movement. 

Yep, I am not even kidding…

Events, TED talks, festivals, best-selling books, you name it.

The common denominator?

That’s right – celebrating failure!

You did read that correctly…

Founders get out there and share their… success FAILURE stories for reinforcing the idea that is not something you need to be ashamed of, but an essential part of being an entrepreneur.

As they say, failure it’s a key stepping-stone for success and you should embrace it even…

… if you’re a high-achiever, Type A’ personality, Alfa-male/female or whatever you like calling yourself.

And yes as an add-on bonus, failure also, wait for it… builds character!

But are all these any true?

Well, that’s what would be exploring today…

The (Business) Case for Failing Fast

So, why do many startup “experts” urge entrepreneurs to fail fast?

In their opinion, it boils down to three words:

Little Bets Theory!

What’s that about?

Mic to Peter Sims, creator of this theory

In these fast-moving times, it’s next to impossible to predict what’s around the corner, and harder still to formulate a foolproof plan to deal with it. Truly innovative companies,… don’t get caught up in projections and predictions. Instead, they embrace uncertainty, take a chance, fail quickly and learn fast.”

Not crazy different from what Eric Ries advocates in his classic book, right?

So yes the idea here is that no matter how much research (and thought) you put into your plan, you always start with a set of unproven hypotheses.

And more often than not, they’ll end up being FAR away from reality…

Which is why wasting months on planning (and developing) a product in ‘stealth mode’ hoping that somehow you’ll beat the odds – in their opinion –  makes no sense.

Rather it would be much better to get out there (by rapid prototyping)…

… fail fast, LEARN, and keep releasing “stuff” (and iterating them) until you get it right.

According to them this way not only you will minimise the risk of failing big, but also maximise the chances of ever making it!

So, are you sold and ready to get “converted” into the practice of failing fast?

STOP!

Fail Fast to Succeed Sooner is a Terrible Startup Advice

There, I said it!

Why is that?

It’s simple – the “throw enough mud at the wall and some of it will stick” model, is a startup strategy lottery ticket mentality that can take you only so far.

I know, some of you might say the ‘little bets’ and the ‘spaghetti on the wall’ models… are not one and the same.

And you’re probably right.

However, from my own experience, I see the majority of this ‘philosophy devotees’ use it as permission to:

a) Recklessly jump into markets that barely understand (and don’t even bother doing some basic market research)

b) Create sloppy unworkable products just for the sake of shipping something fast

c) Throw in the towel on the first setback because they are trained to believe that startups either take off or not (yep, right from the get-go)

So, on this, I am with Rob Asghar

Embracing failure makes for a trendy mythology, especially for the aspiring heroes of innovation. But it’s mostly lip service… Forget the cute mantras. No one should ever set out to fail. The key, really, shouldn’t be to embrace failure, but to embrace resilience and the ability to bounce back.”  

But let me make something absolutely clear.

In no way I am suggesting to embrace the equally dangerous “refuse to accept failure” doctrine, nor am I recommending that you plan stuff for months that may or may not work.

Rather, what I and many others say is this:

– Yes start small, ‘go lean’ and do smart experiments

– Yes iterate/pivot when needed

– BUT do NOT delude yourself that startups either take off or not and try to fail fast to succeed sooner.

All good?

Great – and one last thing about moving fast…

The Inconvenient Truth about Moving Fast & Breaking Thing

What’s that truth about?

Here you go:

We used to have this famous mantra … and the idea here is that as developers, moving quickly is so important that we were even willing to tolerate a few bugs in order to do it…What we realized over time is that it wasn’t helping us to move faster because we had to slow down to fix these bugs and it wasn’t improving our speed.”

– Mark Zuckerberg

Yep, Zuckerberg himself, the guy that pretty much invented this line of thinking points out the obvious:

Moving fast only makes sense when you’re running in the right direction…

My point?

Is one thing to strategically ship stuff fast aiming to get maximum impact from minimum effort and a completely different thing to…

… recklessly launching half-arsed products that are unlikely to produce any form of validated learning.

Yes my friends, by recklessly shipping cr*ppy products you’ll either:

– Be ignored by customers and get 0 feedback

Or

– Receive responses along the lines of: “Your thing is rubbish, give me a break”.

And talking from experience that ain’t no good!

With this out of the way, let’s wrap things up with today’s key takeaways…

Today’s Key Takeaways

– “Throw enough mud at the wall and some of it will stick” is NOT startup strategy

– Forget the cute mantras. No one should ever set out to fail

– Moving fast only makes sense when you’re running in the right direction…

Ok guys, that’s all from me for today.

If you enjoyed today’s post, check out my kindle book, The Vertical Startup: A Practical Guide on How Today’s Bootstrapped Entrepreneurs Turn their Late Market Entry Into An Advantage By Going Vertical, that is currently available at Amazon.

I hope to see you soon.

Best,

Andreas

Fail fast = quit and give up easy = spaghetti against the wall = no clear strategy going into your business = no ability / willingness to try and pivot as market conditions change = easy way out

– Mark Suster

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Domain Experience: A (Startup) Must-Have or Simply Overrated?

New entrepreneur about to enter a market without previous domain experience?

Hate to break it to you but…

… you’re kind of scre*ed!

Or at least that’s what the conventional wisdom suggests.

And yes by domain experience I mean a mixture of hands-on industry experience and deep functional expertise.

So, why (allegedly) that’s the case?

Here you go…

No Domain Experience? STOP!

Reason #1: You’d be stabbing in the dark

Wonder why?

It’s simple – unless you actually live a market and experience how things work first-hand inevitably you’ll have to…

… base your decisions on blurry market hypotheses and not hard-learned market realities.

Yep, market research alone won’t cut it guys – or at least that’s the claim…

Reason #2: You’ll have no credibility

It doesn’t take a rocket scientist to understand that no customer in the right mind would buy from a company unless it comes across as trustworthy.

And the assumption here is that, especially for service-oriented ventures, by being a complete newcomer you’d have a hard time to convince people:

a) you understand where they’re coming from,

b) you know what you’re talking about, and

b) you can deliver upon your promises

Reason #3: You’ll have fewer tries

What does that suppose to mean?

Let me explain…

In an article a couple of years ago, Eric Ries said: Cash on hand is just one important variable in a startup’s life, but it’s not necessarily the most important. What matters most is the number of iterations the company has left.”

His point?

Figuring things out and landing on a plan that works doesn’t come without a deadline.

And the presupposition here is that the lack of domain experience is associated with a lot of preventable rookie mistakes.

Which naturally result in having fewer tries to crack the code.

After all, as they say, “you can’t simply Google your way to expertise”.

So, is it time to admit that newcomers are inevitably at a BIG disadvantage?

Not yet – it’s time to flip the coin and see things from the other side!

No Domain Experience? Don’t Despair!

Yep, according to many having domain experience pre-starting is just unnecessary.

How come?

It boils down to these 2 factors:

Factor #1: Being an outsider can be an advantage in disguise

You did read that correctly…

Coming with ‘a fresh pair of eyes’ helps you see things from a new angle, challenge long-held industry orthodoxies, and bring change.

As Richard Branson, a leading example of this school of thought, admitted once about the creation of Virgin Atlantics:

I knew nothing about air travel, but as I’d flown back and forth from Britain to the United States on business for Virgin Records, I’d become convinced that there had to be a better way… Again, with no knowledge of the industry but plenty of ideas… Virgin Atlantic was born and proved its critics wrong.”

Want more such success stories?

Look no further than the founders of companies of the likes of Airbnb, Uber, Facebook, and Stripe.

Which yes all came out of nowhere with literally no prior industry experience, and made things happen.

Want more convincing?

Here comes factor #2…

Factor #2: You can borrow (or buy) domain experience if needed

Yep, an alternative view is that while domain experience is required, rather than waiting until one day you’ve reached that ‘expert status’…

… you can always outsource it on-demand!

How?

According to the advocates of this ‘model’ through co-founders, advisors, employees, investors, or even external mentors.

The moral of the story?

There is more than one way to skin the cat; or at least that’s the allegation…

My take an all this?

Domain experience: A Big + But Usually Not Prerequisite

Yes my friends, while I agree that domain experience comes with a lot of benefits, I don’t buy that’s an absolute must-have.

That being said, the 2 reasons I listed earlier why domain experience is not that needed are kind of bullshit in my opinion.

I know – shame on me.

But why?

Because the fresh pair of eyes “advantage” is grossly overrated and borrowing expertise it’s easier said than done (assuming that you can also afford it when you’re just starting out).

So, what’s the #1 way to counterbalance the lack of domain experience when entering a new market?

You guessed it – being a user entrepreneur.

Which for those of you not familiar with the term are entrepreneurs who create products or services in response to personal needs/pains.

Yep, this model it’s also known as “scratch your own itch” for a reason!

So, with that said, I think its time to put this baby to bed…with today’s key takeaways.

Today’s Key Takeaways

– Figuring things out & landing on a plan that works doesn’t come without a deadline

Domain experience is a big + but  not a prerequisite

– The #1 way to offset the lack of domain experience is by scratching your own itch

 ***

Ok guys, that’s all from me for today.

If you enjoyed today’s post, check out my kindle book, The Vertical Startup: A Practical Guide on How Today’s Bootstrapped Entrepreneurs Turn their Late Market Entry Into An Advantage By Going Vertical, that is currently available at Amazon.

I hope to see you soon.

Best,

Andreas

“Time is the most valuable asset you don’t own”

– Mark Cuban

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Single Product Companies: Thing of the Past or Still Here For a Reason?

“A startup is not a smaller version of a large company.”

– Steve Blank

Single Product Vs. Multiple Product Companies

Let’s start with a question…

Can you guess what Apple, Virgin, and Microsoft have in common?

Other than being multi-billion dollar companies founded by iconic entrepreneurs.

That’s right – they all have a multi-product portfolio ‘under their brand.

And if you think about it, most companies that are doing relatively well these days, they share that commonality.

Today’s question?

Is it about time to call it quit and admit that single product companies are a thing of the past?

The Multi-Product Biz Advantages

But before getting into that, let’s first go and see the why behind many entrepreneurs’ decision to have a wide range of products.

Sounds good to you?

Great, let’s do this…

Advantage #1: Higher customer lifetime value (aka CLV)

Yes my friends, I am, of course, talking about the amount of money expected from a given customer throughout the relationship with him/her.

The assumption here?

Couldn’t be more straightforward:

By strategically creating products that address multiple needs of a given customer group, you automatically raise the CLV.

Which in practical terms means, increasing your turnover by selling more and more to the same people.

Advantage #2: Spread the risk through diversification

This refers to the long-held belief that you should never put all of your eggs in the same basket.

Why?

Because as they say, since as with life, in business sh*t happens, having a single point of failure is not only dangerous but in fact possibly reckless.

Take Michael Roddy, for example. 

Michael is the owner of a small business that specializes in motion picture lighting for low-budget TV movies, music videos, and industrial commercials.

Why is his story relevant?

Just a couple years ago, his truck was stolen – inside was all of his lighting and grip equipment.

Which resulted in losing his entire business overnight, due to the fact that everything was on that truck.

How do you prevent such catastrophes?

Well, according to ‘the experts,’ you simply have to spread your eggs around and diversify pretty much everything. 

As Gyutae Park puts it:

Diversifying helps you to manage your risk and create a more stable business model regardless of whether you’re in the finance industry or in Internet marketing. If one thing goes down, you have a whole arsenal of other options to keep you alive.”

Their point in a nutshell?

Unless you want to become the new Kodak, don’t overthink it and start diversifying your (business) eggs.

Advantage #3: The insider opportunities factor

The argument here is that…

… by immersing yourself in a field, along the way, many new (insider) opportunities will naturally come your way and some will simply be too big to ignore.

A famous such example?

Here you go – Amazon’s decision to enter the overcrowded supermarket space

So, with all that said, what do you think:

Are multiple-product firms simply superior by nature?

Wait for it…

NO.

How come?

Spot The Pattern (The Single Product Biz Formula)

Ready?

Here you go…

1. The Coca-Cola Company

Current status: Multinational beverage corporation and manufacturer, retailer, and marketer of nonalcoholic beverage concentrates and syrups.

Current product range: Coca-Cola, Sprite, Fanta, Diet Coke, Coca-Cola Zero, Mello Yello, Ciel, Del Valle, Simply Orange, Powerade… and many others.

How Coca-Cola started: The Coca-Cola Company started as a single-product company selling just Coca-Cola (and stayed that way for decades).

2. Crocs

Current status: A world leader in innovative casual footwear for men, women, and children with more than $1 billion in annual revenue.

Current product range: Crocs sells a wide range of shoes from clogs, slippers, sneakers, and loafers to boots, sandals, flats, heels, and wedges.

How Crocs started: Crocs started as a single-product company selling just Crocs (and stayed that way for decades).

3. The Economist Group

Current status: The Economist is one of the most widely-recognised and well-read current affairs publications with a growing global circulation of around 1.5m readers.

Current product range: The Economist brand encompasses The Economist, The Economist Intelligence Unit, EuroFinance, CQ Roll Call, TVC, and Ideas People Media.

How The Economist started: No guessing here, The Economist started as a single-product company publishing just one publication (and stayed that way for decades).

4. Michelin

Current status: Michelin is one of the three largest tire manufacturers in the world, offering tire solutions for every type of vehicle. It also offers digital mobility support services and publishes travel guides, hotel and restaurant guides, and maps and road atlases.

Current product range: In addition to the Michelin brand, it owns the BFGoodrich, Kleber, Tigar, Riken, Kormoran, and Uniroyal tire brands and is also well-known for its Red and Green travel guides, its roadmaps, and the Michelin stars that the Red Guide awards to restaurants for their cooking.

How Michelin started: Michelin, yes, started as a single-product company selling just car tires (and stayed that way for decades).

5. Duracell

Current status: Duracell Inc. is an American manufacturing company owned by Berkshire Hathaway that produces batteries and smart power systems.

Current product range: Duracell manufactures alkaline batteries and speciality batteries and also entered into a brand licensing agreement with Dane-Elec for a new line of products that includes memory cards, hard drives, and USB flash drives.

How Duracell started: Duracell, as you can imagine, also started as a single-product company selling just alkaline batteries (and stayed that way for decades).

You got this!

Win the battles you are in before you take on new ones

Yes, my friends.

All the aforementioned companies ‘started singular’ and only moved onto the next battle when they absolutely nailed that first one.

Why?

Mark Cuban has the answer!

You do not have unlimited time and/or attention. You may work 24 hours a day, but those 24 hours spent winning your core business will pay offer far more. It might cost you some longer term upside, but it will allow you to be the best business you can be…. [So] win the battles you are in first, then worry about expansion into new businesses.”

As for the diversification claim, even though I tend to agree with…

… Warren Buffett when states that “diversification is protection against ignorance,” I am of the belief that:

We should not forget, that empirically, most startups fail NOT because they didn’t diversify enough but instead because either they solved an imaginary market problem or failed, big time, on the execution side of things.

So, what’s my take in a sentence?

Startups, in general, win with focus and not by spreading themselves crazy thin.

Today’s Key Takeaways

– When starting out, less is more.

– Quite a lot of today’s business icons started as single-product companies.

– Win the battles you are in before you take on new battles.

– You’re just a startup; now act like one.

***

Ok guys, that’s all from me for today.

If you enjoyed today’s post, check out my kindle book, The Vertical Startup: A practical guide on how today’s bootstrapped entrepreneurs turn a late market entry into an advantage by going vertical, that is currently available at Amazon.

I hope to see you soon.

Best,

Andreas

“Success demands singleness of purpose”

– Vince Lombardi

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Product vs Services Startups: 6 Key Factors you Should Consider Before Making Up your Mind

So, you’re thinking to start a business.

But haven’t yet made up your mind whether to start a product or a service (startup) business.

I know – the product vs service company dilemma is a real thing.

Despite the mainstream believe (mostly by self-proclaimed business gurus) that…

… selling a product is always better.

Yes, my friends – as Mark Birch rightly puts it:

Running a service company versus running a product startup are vastly different creatures.”

And that’s why today will take a deep dive and explore their differences.

All good?

Great – let’s get straight in…

6 Key Differences Between a Product and a Service Startup

Difference #1: Time to market

Can you guess why?

That’s right – the amount of time it takes to convert an idea into something sellable differs dramatically depending on which route you take.

In the first scenario (having a product-based startup), you have a ‘model’ that requires investing time + resources upfront for conceptualising, creating, & testing the product.

On the flip side (having a service-based startup), you can get a business off the ground and start billing for your services way much sooner.

Pretty straightforward isn’t it?

Difference #2: Scalability

Even though you probably heard that term a thousand times let’s make sure we’re all on the same page.

According to Martin Zwilling, scalability means:

Your business has the potential to multiply revenue with minimal incremental cost. A software product is a classic example of a scalable solution since it costs real money to build the first copy, but unlimited additional copies can be quickly cloned for almost no incremental cost.”

And yes as you can imagine, “product startups” have an advantage here.

For the simple reason that unlike the service model (which trades dollars for hours), the products’ model – especially when it has a digital form – is limited only by the number of customers willing to pay for it.

Of course, you might say that if there is a lot of demand for your service you can always hire more people, but that extra cost can hardly be described as minimal (see Martin’s definition).

Difference #3: Business risk

So, which business model is riskier?

No guesses here – selling a product.

Why?

a) No upfront customer commitment

Unlike service businesses where you have a customer commitment to pay before you even start working, with products there is no guarantee* that you’ll sell enough units to justify the initial investment.

* Obviously, you can mitigate some of this risk by either gauging demand upfront (through pre-orders) or starting small with an MVP.

b) It has much higher set-up cost compared with selling a service

Because you have to commit resources to build “that thing,” rather than bill clients for a specific skill/expertise you ALREADY have.

c) Product requirements are drafted by you and NOT the customer

Yep, when you sell a service, the customer normally knows exactly what s/he wants & helps you figure out the product specs.

Which is normally NOT the case with most product businesses where you have to figure things out yourself.

Difference #4: Reusability

This should come as no one’s surprise.

A product-based business requires you to reinvent the wheel once.

Which means if the “experiment” is successful, you can sell that very same thing multiple times until the market shifts (which will then require you to iterate it accordingly).

On the other hand, service-based businesses deliver one-off (bespoke) solutions…

… because the end result will be highly personalised to each client and as a result not reusable for the next customers.

Hence, why in this scenario, the ‘product-based business’ (model) wins!

Difference #5: Time spent on “your thing”

What does that even supposed to mean?

It’s simple – if you have a service business around a core (marketable) hard skill of yours it’s not hard to imagine why you’ll end up spending a GOOD chunk of your time practising it.

Whether that skill it’s web designing, career coaching, book editing, or something else the principle stays the same.

On the other hand, with product businesses, once you build it you have just one job:

Yep, marketing and selling that thing!

I know; some might say that’s not necessarily the case.

Because of the belief that…

… you can always outsource marketing/selling.

The cold hard truth?

Especially when it comes to businesses with a single founder, when you’re starting out that’s almost always a TERRIBLE business decision.

How come?

Because:

a) As the founder, you’re the person that knows the product and the market better than anyone else

b) During this early stage having these 1-2-1 conversations with your prospective customers are pure gold.

Difference #6: Control

Just think for a moment…

On the one hand, you have a business model that requires you to craft a solution in accordance with each client’s specific requirements.

On the other hand, you have to provide a standardised product that tackles a very specific problem experienced by a narrow category of people.

So, which sounds to you like the option with the most control?

That’s correct – the latter!

Of course, that’s not to say that it’s impossible to be in control with a service-based model. Just to highlight that with products it’s much easier to say:

“This is what’s for dinner; take it or leave it!”

So, with all that said, what’s the verdict?

Well, that’s for you to decide because…

… depending on your life goals, business aspirations and risk profile the right answer would naturally be different.

***

And with that comes the end of today’s post…

If you enjoyed today’s post, check out my kindle book, The Vertical Startup: A practical guide on how today’s bootstrapped entrepreneurs turn a late market entry into an advantage by going vertical, that is currently available at Amazon.

I hope to see you soon.

Best,

Andreas

“In the modern world of business, it is useless to be a creative, original thinker unless you can also sell what you create”

– David Ogilvy

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Second Mover Advantage: The Complete Guide (2019)

Whether you’re just starting out or have years of (business) experience…

… this new guide will walk you through everything you need to know about the elusive second mover advantage.

Even if you never heard a word about it before!

And then give you actionable strategies to help you turn a late market entry into an advantage.

Sounds good?

Great, let’s get straight in…

‘Second Mover Advantage’ Basics 

First, let’s tackle the basics…

1. What Is The Second Mover Advantage?

Is the advantage a company gets by entering a market AFTER the playing field has been established by the first-mover(s).

2. What Are The Different Types of Second Movers?

a) Fast Followers: Companies that recognise a biz opportunity relatively early one (while there is competition just from the ‘first movers’) & jump straight in.

b) Late Movers: Companies that enter fairly mature markets characterised by high levels of competition.

3. Why ‘Starting Second’ Can Be An Advantage in Disguise?

In short, it boils down to this:

In an established (or reasonably established) market there are MANY more knowns than unknowns when it comes to customers’ needs, spending patterns, and priorities…

… which naturally reduces the risk for a new venture.

And with the basics out of the way, let’s dive on the main menu…

The Advantages of Being ‘Second Mover’

So, what are the benefits of being second?

Here you go:

Advantage #1: You know there is a market

Yep – and this should come as no one’s surprise.

After all, there is no better proof that a market exists than PAYING customers.

And when you enter an established market you see just exactly that…

– Competing products

– Demonstrable customer demand

– ‘Real-world’ profits

So, assuming that we all agree with Marc Andreesen, that:

Market matters most; neither a stellar team nor fantastic product will redeem a bad market. Markets that don’t exist don’t care how smart you are”…

… it’s fair to say that entering a market post-validation is a GREAT starting point.

Advantage #2: You have strong reference points

That’s right – unlike the so-called market pioneers 2nd movers can learn from others’ trials & errors.

Which in practical terms means that as a second mover you can see:

– Winning product features

– Projects shoot behind the barn

– Battle-tested marketing tactics

– Catastrophic product launches

– And many more…

So, by having some prior experience (even if its second hand) to fall back on, second movers can:

Adopt what works and throw under the bus what doesn’t!

Advantage #3: The ‘free-rider effect

And last but not least comes the ‘free-rider effect’…

What does that even mean?

Well, it’s simple:

Late movers {are often}… able to ‘free-ride’ on pioneering firms investments in a number of areas including R&D, buyer education, and infrastructure development.

Which when you think about it makes perfect sense.

Just consider for example how much time and money Match.com had to spend to educate (and ultimately convince) the market to date online.

Or maybe how much $ BlackBerry had to burn to establish the need to have an email on your phone.

Or even Tesla’s investment in creating charging points for their electric cars throughout USA.

So, the point is that by piggybacking on the first mover(s) development spending, ‘doing business’, in general, becomes much less expensive.

Real-World Examples of Companies That Made It By ‘Being Second’

Assuming that we’re all on the same page let’s put things into perspective and see…

… how companies out of this world ‘went second’ but made it BIG.

1. Amazon.com (fast-follower)

How it got started: Amazon.com started as an online bookstore back in 1995.

Who was the first mover: “Unbeknownst to many, is that Book Stacks Unlimited, was founded in 1991, and launched online in 1992. Founded by Charles M. Stack, it is considered to be the very first e-bookstore.”

The end result: You already know what happened. Amazon experienced the so-called second mover advantage, won that battle, expanded to many other verticals & finally became America’s largest online retailer. As for Bookstacks, a couple years later ended up being sold to Barnes and Noble.

2. Jet.com (late-mover)

How it got started: Jet.com founded in 2014 as an e-commerce platform by Marc Lore (ex Diapers.com founder)

Who was the first mover: “Boston Computer Exchange which was launched in 1982, was the world’s first ecommerce company. Its primary function was to serve as an e-market for people interested in selling their used computers.

The end result: Jet.com while, of course, not a market leader within just 2 years managed to transition from a tiny company to a $ making machine that as of 2016 is a subsidiary of Walmart.

3. Google (fast-follower)

How it got started: Google started back in 1996 as a research project by Larry Page & Sergey Brin while being at Stanford University.

Who was the first mover: While technically speaking the first search engine was Archie, the first one to process natural language queries was Alta Vista…

The end result: As of July 2018 Google.com has 86.02% of the global market share; need to say more?

4. LinkedIn (late-mover)

How it got started: LinkedIn.com launched in 2003 by Reid Hoffman as a work-driven social networking site.

Who was the first mover: While most of you will probably be familiar with names such as AOL, MySpace and Friendster, Geocities {launched back in 1994} was the first social networking site.

The end result: “As of October 2018, LinkedIn had 590 million registered members in 200 countries, out of which more than 250 million active users

5. DuckDuckGo (late-mover)

How it got started: DuckDuckGo.com launched back in 2008 as a privacy-driven internet search engine.

Who was the first mover: While technically speaking the first search engine was Archie, the first one to process natural language queries was Alta Vista…

The end result: DuckDuckGo.com is a multi-million $ company and as of November 2018 it had 29,661,659 daily direct searches on average.

Ideal Conditions for Entering a Market Late

Yes my friends – not all markets are created equal.

What does that suppose to mean?

Put simply, past experience is telling us that…

… some markets highly reward first-movers and some others not so much!

To get specific here are a couple of factors that seem to play a role in whether a market is ‘friendly’ towards pioneers or second movers:

Expected life of the product category (the shorter the better for market pioneers)

– Switching costs (the higher the better for market pioneers) 

– Objective standards of quality (the easier is to judge a product the better for second movers)

– Reformulation costs (the lower the better for second movers)

– The pace of market evolution (the slower a market is moving the better for market pioneers)

So, with all that said, here is a quick summary of the ideal conditions for entering a market late:

1.Long expected life of a product category (aka evergreen markets)

2. Low costs for customers to switch from one brand to another

3. Highly objective standards of quality (what I like to call as objective bechmarkability)

4. Low reformulation costs (aka the ability to “borrow” elements easily from the pioneer’s prop.)

5. High pace of market evolution (which helps followers to come up with something better)

Of course, that’s not to say that with any of the above conditions absent entering a market late becomes a non-starter…

… just to highlight that, in principle, that’s what ideally you should be shooting for.

And with the conditions covered it’s time to address the elephant in the room.

Which is, of course, the so-called ‘first-mover advantage’…

The First Mover Advantage: What is Truth & What is BS

What’s the ‘first-mover advantage’?

The advantage gained by a company that first introduces a product or service to the market.” 

Yep – that straightforward!

And it’s not a secret that throughout the years’ many companies experience that effect.

Just like Uber; or Airbnb…

… which as the def. suggests they jumped super early on and made a TON of money.

But how the first movers do it?

Well, while from one business to another the recipe might be different, the below 5 factors allegedly seem to play a role:

1. Market leadership through product patenting (i.e. drugs in the pharmaceutical industry)

2. Pre-emption of scarce assets (i.e. key suppliers/geo-locations/distribution-channels/etc.)

3. Brand Recognition and customer loyalty (i.e. Coca-Cola)

4. The Network Effect (i.e. eBay)

5. High buyer switching costs (the costs often have a monetary nature or are time/effort related)

What’s the catch?

It’s simple –this “model” comes with A TON of risk…

In fact, an older research suggests that first movers are roughly six times as likely to fail as “fast followers”.

And if you think about it, it kind of makes sense…

So, what is truth and what is BS?

While the first-mover advantage is a real thing, & when achieved can yield some handsome profits…

… overall is extremely overrated & is definitely NOT a required element for building a great business.

All good?

Great – now let’s go and discuss Peter Thiel’s latest darling!

Peter Thiel and the ‘Last Mover Advantage’

Peter Thiel…

Top man, great entrepreneur!

But what does he think about the so-called first movers?

Here you go:

First mover isn’t what’s important — it’s the last mover. Like Microsoft was the last operating system, and Google was the last search engine.

But what’s his logic?

Thiel, on his book, Zero to One, where he first introduced this concept argues that…

… the ‘perfect time to entry’ is late enough to learn from pioneers’ mistakes and leverage technological breakthroughs but not so late that the market is already closed off to new entries.

And then he goes talking on how to actually ‘block’ new market entries (by monopolising the product category you are in).

So, does Thiel got this right?

Well, while there is no conclusive evidence to back-up his claims, the fact of the matter is…

… that Microsoft, Google (or even Facebook that also talks about on his book) are definitely NOT the last players in their respective product category.

Of course, as you know, all of them managed to have the market’s lion share, but nontheless that didn’t stop new players to have wieldy successful entries.

Just like Ubuntu, DuckDuckGo or Instagram…

So, assuming that everything is clear, let’s get back on the ‘second mover advantage’ and go and see how market followers can beat a crowded market!

Market Follower Strategies for Beating a Crowded Market

So, how you can enter a crowded market? And beat incumbents players on their own game?

Whaaat?

That’s right – past experience tells us that going head-to-head with incumbent players (as a startup) and trying to beat them on their own game it’s a rarely a sound advice.

Unless of course, you are WELL capitalised and willing to play the long game as a challenger brand.

Otherwise, the best strategy when arriving ‘late to the party’ is shifting the basis of competition. 

Which in practical terms means figuring out a way to cut through the noise and set yourself apart from the competition.

So, how you do it?

While different markets will require different strategies, here are 3 options to get the ball rolling:

Strategy #1: Hyperlocal Positioning

As the name suggests, this strategy is geo-focused.

Said differently, hyperlocal brands exclusively focus in just one geographic area with a local solution.

Want a couple of examples? No problem – here you go:

1. Cents-able Oil – Home heating oil provider for the New Haven area

2. Nutrifix – Healthy food locator for the London Area

3. 1871 Chicago – Digital entrepreneurship hub for the Chicago area

Strategy #2: Singular Customer Targeting

What does that suppose to mean?

It’s simple – serving one customer group at the exclusion of everyone else.

In other words, creating a business that zero in on just one target group.

Just like what DigiMax Dental did – which fyi is a marketing agency exclusively for dentists.

Strategy #3: Going Vertical

Going vertical, I hear you ask?

Yep, is the strategy of launching a company to offer a niche product that serves a specialised need of one tightly-defined target group.

A bit confusing?

No worries – let me now share a company that is a textbook example of verticalization done right.

Introducing Fetcher – a profit analytics tool for Amazon businesses.

Vertical: Amazon profit analytics 

Specialised Problem/Need: Amazon sellers experience the headache of trying to calculate their profits and analyse the general health of their business (in detail), due to the ‘Seller Central’ dashboard’s current limitations.

Niche Proposition: “Fetcher is a profit analytics tool for Amazon businesses. We fetch, calculate, and display your seller data from Amazon so you can see product profitability & many other key metrics. Our seller dashboard, detailed product breakdown analysis, & Profit and Loss statements make data-based analysis simple and will help you build a prosperous ecommerce platform

All good?

The Next Step For Aspiring Second Movers

So that’s my ‘definite guide’ to the second mover advantage.

I hope you enjoyed it and found it useful.

If you are keen to take the next step & join the 2nd movers club it might worth checking out my Kindle book: The Vertical Startup: A Practical Guide on How Today’s Bootstrapped Entrepreneurs Turn their Late Market Entry Into An Advantage By Going Vertical, that is now available at Amazon…

… and which as the title suggests will walk you through everything you need to know about ‘going vertical’ as a second mover.

Either way, thanks for taking the time and reading this guide.

I hope to see you soon.

Best

Andreas

P.S. Think I missed something? Or maybe you have a question about something you read? I’d love to hear from you; email me at andreas@nomorestartupmyths.com and I’ll get back as soon as I can…

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