Vijay Anand | The Startup Guy.

Build to Last: The Goldrush Strategy – Avoid it.

Posted on: April 24, 2008

Up until a couple of years ago, the concept of “First movers’ advantage” had some credit to it – atleast in the web world since it was quite nascent. Lately more and more folks are realizing, and rightly so, that whatever happened in the PC Platform, is repeating itself in the web world. If you are creating a market, moving first essentially means that you are going to be deploying a whole array of tactics – including pumping in money – to get the word out as to this mysterious problem that people have and how we’ve gone for so long without knowing that we had a need for it and now that we do, here’s the solution.

The Only analogy that fits this strategy is what happened in the US when the colonization began. Obviously, everyone was quite familiar with the “yellow Dust” that the native Indians simply didn’t care for. And when the immigrants did arrive, and realize that there was gold just lying there in the river basins, the rush was to essentially get to where no man has even been to – to enjoy the luxuries and wealth that he might find.

I am slightly against the so called first movers advantage, because it essentially means that you are planning to go find a problem – hopefully a real problem – and stake the entire zone for yourself. Hmm. It usually doesn’t work. Here’s why.

The market is global. And News travels fast. By the time you actually create that awareness wave, it will spread much faster than the company can expand operations. It will then turn into the inevitable home turf vs. foreign markets and we all know how that game goes. You start playing defense from day one.

Customer Loyalty is on a lowest low these days. There is no such thing as inherent branding that happens – especially if its in the web world. Sell someone a Sony Bravia, and since its a more tangible product, the branding aspect still sticks. When it comes to services and applications around the web, nope nobody cares. I’d flip in a jiffy if I find a better tool that does what I want to do and expands my productivity.

The First Mover advantage, (a.k.a The Goldrush strategy) works where niche products and brands are in play. For a startup, those are dangerous and long term goals to achieve and there are more pressing needs.

I am lately realizing how many of the hip companies of the internet which was so hot last year, arent anywhere now. I was fighting over everyone to get a subscription about in Scribe and I do like what they do, except that I also have plenty of alternatives. I am not even sure if I remember my username password there. I am sure you can think of many more names that I could. I want to focus on what it takes to build a company that lasts a lifetime or even more. In a day and age, when it seems that most of the hottest companies also seem to be dying off pretty rapidly, that’s a thought that almost makes me smile… and wonder.

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4 Responses to "Build to Last: The Goldrush Strategy – Avoid it."

How do you explain the sustained advantage Amazon and Yahoo enjoy ?

what do you have to say about Facebook and Orkut?

Let’s not generalize on a few examples.

As a customer,i am looking for compelling value.With a zero cost to my disloyalty i have the bandwidth to experiment.This is precisely what’s happening and it has nothing to do with “First”, “Second” or “any” mover advantage.

Abu:

1. “Sustained advantage” It takes effort. Yahoo might not survive it. It lost it when google overtook it. And Amazon.com keeps it because it has an amazing guy at its helm. It’s simply not for everyone.

2. Facebook and Orkut? They were barely the first ones on the scene. Remember Bebo? Xanga? Friendster? Hifive? They were the first ones to get into the social networking space.

I’d ask you to drink your own coolaid. Don’t generalize on a single example 🙂

PS: That last sentence made no sense.

So, what’s the ideal strategy for market entry ?

Which company and market are we talking about? A lot depends on that, and the team implementing the solution.

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