The race to the market: Here’s why waiting to launch your product could lead to market dominance

market dominance

Google Chrome wasn't the first search engine, but it has market dominance now. Source: Unsplash/Rajeshwar Bachu

TikTok Stories sounds just like it’s competitor’s, Instagram, but with a twist: it has an added feature. TikTok users will be able to publicly comment on stories.

This is just the latest example of a copycat outdoing the originator, a concept that is well supported by our latest research. We found that companies rush to be first to market can result in lower profits and market share, and worse products for consumers.

In our research, we study the decision of when a firm should launch a new product. Waiting has the advantage that a firm can enter with a better product or freeride on their rival’s investments. However, given that it has to wait, a follower is at the mercy of the other firm’s choice as to when they will lead.

This raises its own issues. A follower might not like the leader’s choice of entry time; it might be too far into the future, in the wrong season, or at a time that is less than ideal for some other reason.

This disadvantage can result in some interesting cat-and-mouse strategy between the firms. Indeed, even if both firms would rather play the role as a follower, they can find themselves in a race to be first to market, so as to avoid their rival entering as a leader at the ‘wrong’ time. In these situations, it can be that the market leader enters so early it ends up with lower profits.

Our research can help explain the eventual dominance of followers we observe across a wide range of markets. Apple was not the inventor of the personal computer and Google Chrome was not the first search engine. Facebook was not the first social networking site. The iPhone was not the first smartphone and Pampers were not the first disposable diaper. Why is this the case?

When rival firms find themselves in a race to be first, this competition can result in the market leader launching a product that is not fully developed or lacking in underlying market research. This provides a distinct advantage to the follower when it eventually launches its own product: not only has it had longer to research and refine its offering, often it will be competing with an underdone product rushed to market too early.

Think: Sony capitalising on RCA’s invention of the colour television. NBC — a division of RCA — began testing colour TV in the US in the 1940s. Sony entered the market over 20 years later, and until the rise of Samsung in the mid-2000s, maintained market leadership throughout that period. The company used and improved on RCA’s design, generating a sharper image.

Another example: Ford infamously rushed out its 1957 ‘Edsel’ car having failed to undertake sufficient market research. It was taken off the market three years later. 

The race to market not only often hurts companies, it can disadvantage consumers. The first product launched might be full of bugs or might not be sufficiently distinct from current market offerings.

Video games are notorious for this, with several highly anticipated launches flopping on arrival. One of the most hyped games of last year, Cyberpunk 2077, was so riddled with bugs, customers were offered refunds. In terms of lack of innovation, the iPhone has been hit with claims of this as it pushes out new models that hardly diverge from older ones almost annually. Likely as a result, Apple’s iPhone has lost market share to the Samsung Galaxy. 

Being first, consequently, is not always best for CEOs, shareholders, or customers. Rather, waiting — despite the temptations of leadership — can lead to market dominance.

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CrabmasterXD
CrabmasterXD
27 days ago

Very insightful!