Entrepreneurship, Second Edition

4.2. The First-Mover Myth

Beware entrepreneurs who claim they have a "first-mover advantage." This claim is part and parcel of the "we don't have any competition" claim discussed in the previous chapter. Most entrepreneurs who make these claims don't truly understand the nature of their business and what a first-mover advantage really is. Elizabeth Preis, founder of Beautiful Legs by Post (BLBP), a mail-order firm that delivered quality panty hose to professional women in the United Kingdom, claimed that her firm had a first-mover advantage because no other specialty mail-order catalog had tapped into this market.^[] Preis said she would capture these women before other firms had the chance to enter. This would create loyalty to BLBP, she claimed, that would not only ensure that her company would beat the competition but also dissuade potential competitors from entering the market. Let's ignore the fact that "other specialty mail-order catalogs" is an overly narrow definition of her competition and focus instead on how Preis intended to execute this first-mover advantage. Her three-year pro-forma financials show that she expected to capture 1.17% of her target market of upscale professional women. Such low penetration over three years isn't necessarily bad, but clearly it is not a first-mover advantage. At that level, BLBP wouldn't preempt competition from entering; there are too many women who haven't bought from, let alone heard of, BLBP to have any sense of loyalty or switching ...