First to Market, First to Fail? Real Causes of Enduring Market Leadership

  • Gerard J. Tellis and Peter N. Golder
  • January 15, 1996

Managers and entrepreneurs frequently adhere to the motto of being first to market. But the authors have discovered that many pioneers fail, while most current leaders are not pioneers. Using a historical method, the authors try to determine why pioneers fail and early leaders succeed. They have found that market leaders embody five factors critical to success: vision, persistence, commitment, innovation, and asset leverage.

Be first to market. This principle is one of the most enduring in business theory and practice. Entrepreneurs and established giants are always in a race to be first. Research from the 1980s that shows that market pioneers have enduring advantages in distribution, product-line breadth, product quality, and, especially, market share underscores this principle. For example, several studies of the PIMS (profit impact of market strategies) database show that mean market shares over a large cross section of businesses are around 30 percent for market pioneers, 19 percent for early followers, and 13 percent for late entrants.1 Similar estimates emerge from a study of the completely different ASSESSOR data.2 That two independent databases collected by different methods and researchers should yield similar results is impressive. In addition, PIMS data show that more than 70 percent of current market leaders are market pioneers, while Urban et al. are unaware of any pioneers in their sample that failed.3 Further evidence in support of a pioneer advantage comes from an Advertising Age study that shows that, of twenty-five market leaders in 1923, nineteen were still market leaders in 1983, and all were still in the top five.4 The belief in enduring pioneer advantage grew so strong that some authors even suggested that firms preannounce a product’s introduction to claim the advantages that accrue to the pioneer.

But as most people came to believe in the strong advantages of market pioneering, some researchers warned of potential problems with the studies on which this belief was based.5 Kerin, Varadarajan, and Peterson state, “The belief that entry order automatically endows first movers with immutable competitive advantages and later entrants with overwhelming disadvantages is naive.”6 In particular, the data that support the advantages of pioneers suffer from three key limitations.

First, PIMS and ASSESSOR data are collected by surveying surviving firms. Thus they include only survivors and not failures. Failures may hold important lessons, and their inclusion may change the statistics. Second, these two databases determine the market pioneer by surveying a current employee in a responding firm.