The Second Mover Success Formula
Matt Watson
Product Driven Engineer, Founder/CTO for 20 years, Bootstrapped a SaaS company to a 9 figure exit, CEO of Full Scale
Have you ever noticed how many "revolutionary" products actually weren't the first of their kind?
Facebook wasn't the first social network.
Google wasn't the first search engine.
The iPhone wasn't the first smartphone.
Yet these companies dominated their markets and became the defining products of their categories. This isn't coincidence – it's a pattern that reveals a crucial truth about innovation and market timing.
Building successful products isn't just about having the right idea - it's about having the right idea at the right time.
I recently had a conversation with Paul Orlando, author of Why Now? that challenges everything you think you know about market timing and the mythical "first-mover advantage."
I've lived through the highs and lows of market timing. I've been too early (building mobile apps before smartphones existed), right on time (launching an online car dealer platform just as the industry went digital), and I've watched countless competitors come and go based largely on their timing.
Through these experiences, I've learned that success often has less to do with being first and more to do with being ready when the market is ready.
What makes this topic particularly relevant today is the accelerating pace of technological change. With AI, blockchain, quantum computing, and other transformative technologies on the horizon, understanding market timing is critical for survival.
Companies that master this skill can turn market shifts into opportunities, while those who don't risk building solutions for problems that aren't ready to be solved.
The First-Mover Myth: A Historical Perspective
The concept of "first-mover advantage" has been drilled into entrepreneurs' heads for decades.
However, as Paul revealed in our discussion, this widely misunderstood concept originated from two professors in the 1980s who weren't actually advocating for being first.
Their research, which was later misappropriated during the dot-com era, showed that first movers rarely maintain their advantage.
Consider AT&T's venture into video phones in the 1960s.
They successfully developed working video call technology, but the business model was unsustainable - the device cost thousands in today's dollars, with monthly subscriptions around $1,000. The technology worked, but the timing and infrastructure weren't right. Fast forward to today, and video calling is ubiquitous through platforms like Zoom and FaceTime.
I've experienced this firsthand.
Back in 2003, my company VinSolutions developed a mobile app for car dealerships to upload vehicle photos to online marketplaces. We built it for Palm Pilots with 1-megapixel cameras before the iPhone existed.
While revolutionary, we faced constant technical limitations - sun glare made the screen unreadable, image quality was poor, and the hardware was expensive.
The idea was right, but the technology wasn't ready.
When First-Mover Advantage Actually Works
While being first isn't always best, there are specific scenarios where being first can provide a genuine competitive advantage. Through my conversation with Paul, we identified two key situations where being first can be a powerful strategic position.
Customer Lock-In Dominance
This occurs when your product becomes so deeply embedded in customers' workflows or lives that switching costs become prohibitively high.
QuickBooks is a perfect example of this phenomenon. As Paul explained, "For something like QuickBooks, they've got customer lock-in... people don't like to learn new things. So they stick with it even if it's a generation out of date."
This lock-in effect becomes particularly powerful when your product stores critical customer data or when users have invested significant time learning your system.
The advantage compounds when your solution integrates deeply with other business processes, making it increasingly difficult to switch providers. In these cases, switching providers would create such significant operational disruption that customers often choose to stay, even if better alternatives emerge.
Resource Exclusivity
This kicks in when you can effectively block competitors from accessing critical resources.
This exclusivity often manifests through intellectual property, such as patents that protect core innovations or proprietary algorithms that are difficult to replicate. It can also appear in the form of talent pool control, where early movers can hire key experts in emerging fields and build specialized teams with rare skill sets.
Data advantages represent another form of resource exclusivity. Early movers can accumulate valuable historical data and build unique datasets that improve product performance over time. Strategic resources, such as exclusive partnerships or hard-to-replicate infrastructure, can also create lasting advantages that later entrants struggle to overcome.
However, even in these scenarios, being first isn't enough on its own.
Continuous innovation becomes crucial for maintaining your lead.
Being first gives you a head start, but keeping that lead requires regular product improvements and staying ahead of technological changes. You must anticipate and address customer needs while watching for potential disruptive threats that could erode your advantage.
It's crucial to watch for signs of this erosion. T
Technological changes can decrease switching costs, new competitors might find ways around your resource advantages, customer preferences could shift, or regulatory changes might level the playing field. These changes often happen gradually, then suddenly, making constant vigilance essential.
Timing Drivers That Transform Markets
Success often comes down to recognizing and capitalizing on key market changes. During our conversation, Paul identified several critical timing drivers that create opportunities:
Technology Enablement
Market Dynamics
Resource Availability
The Smart Follower Strategy
As a technical leader who's built and scaled multiple products, I've learned that being second or third to market often provides significant advantages. The key is to recognize that pioneers clear the path, but followers can often build better, more sustainable businesses by learning from others' experiences. Through my conversation with Paul, we explored how smart followers can systematically capitalize on market opportunities.
Technical Maturity
When you enter a market as a smart follower, you benefit from a more mature technical ecosystem. The pioneers have already wrestled with fundamental technical challenges, often investing significant time and resources to solve core problems. You can build on stable, tested technologies rather than bleeding-edge experiments. Paul illustrated this point with the evolution of video conferencing – while AT&T struggled with basic video transmission in the 1960s, modern platforms like Zoom could focus on user experience and scalability because the underlying technology had matured.
Infrastructure costs typically decrease significantly by the time smart followers enter the market. Paul shared how the excess dark fiber from the dot-com era dramatically reduced infrastructure costs for subsequent companies. Similarly, cloud computing has made it possible to launch sophisticated products without massive upfront infrastructure investments. This cost reduction often transforms business models that were previously unviable into attractive opportunities.
Integration ecosystems also tend to be more developed for followers. Instead of building everything from scratch, you can leverage existing APIs, frameworks, and tools. This allows you to focus your resources on differentiation rather than reinventing basic functionality.
Market Understanding
Perhaps the most valuable advantage of being a smart follower is deeper market understanding. The pioneers have already done the hard work of educating customers and validating use cases. Paul emphasized how this market education often represents one of the largest hidden costs of being first – pioneers must convince customers they have a problem worth solving before they can even begin selling their solution.
Customer needs become much clearer once a market matures. Through my experience with VinSolutions, we could see exactly what car dealers wanted because earlier companies had already experimented with different approaches. This allowed us to focus on solving real, validated problems rather than making assumptions about what customers might want.
Price points and business models have also been tested by the time followers enter the market. You can see what customers are willing to pay, which features they value most, and which business models generate sustainable revenue. This market intelligence is invaluable for making strategic decisions about product positioning and go-to-market strategy.
Risk Reduction
Being a smart follower significantly reduces various types of risk. Major technical challenges have been identified and often solved, allowing you to avoid costly technical dead ends. Paul shared how many AI companies like Jasper were able to move quickly when ChatGPT demonstrated market demand because they had already built foundational capabilities while learning from others' experiments.
Market education costs are shared across multiple players rather than being borne entirely by one company. When we launched VinSolutions, car dealers already understood the value of online marketing – we didn't have to convince them of the basic premise, just that our solution was better.
Implementation best practices emerge through others' experiences. You can learn from both successes and failures in the market, applying proven approaches rather than learning everything through trial and error. This institutional knowledge helps you avoid common pitfalls and focus on areas where you can truly add value.
However, Paul emphasized that being a smart follower isn't about simple imitation – it's about understanding the market deeply enough to see opportunities for meaningful improvement. Take Zoom's success: they weren't first to video conferencing, but they recognized that existing solutions were too complex and built something significantly easier to use. They combined market understanding with technical maturity to create a superior product when the timing was right.
Evaluating Your Market Timing
Paul shared a valuable framework for assessing market timing that every technical leader should consider:
Identify Timing Drivers
Analyze Business Model Impact
Assess Organizational Readiness
Making the Right Call
Your success as a technical leader often hinges on making the right build vs. wait decisions. Here's what I've learned about timing these decisions:
Build early when:
Wait and optimize when:
The Bottom Line
First-mover advantage is largely a myth.
What matters is moving at the right time with the right capabilities.
As Paul points out in his book, you can find earlier versions of almost any successful product - sometimes decades earlier.
The winners weren't first; they just understood the timing.
The key is matching your strategy to your organizational strengths and market conditions. Some teams are built to pioneer, while others excel at optimizing and scaling proven concepts.
Remember - many of today's most successful products weren't first to market. They were just the first to get the timing right.
Would you rather be first or would you rather be right?
Want the full story? This article is based on my latest Product Driven episode.
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Matt Watson is the host of Product Driven and co-founder of Full Scale, a global staffing company that helps businesses build and scale their engineering, finance, marketing, and admin teams. A three-time founder, he grew VinSolutions to $30M ARR before a $150M exit, later sold Stackify in 2021, and continues to share insights from his entrepreneurial journey through his podcast?and this newsletter.
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Accelerators/Incubators | Innovation Programs | Product Growth | Why Now Question
3 天前Really enjoyed speaking with you. I hope our conversation helps companies as they decide where to place their bets and consider timing as an advantage they can use.