Being First Doesn’t Matter, Being Better Does

Innovation is messy. There’s nothing predictable about it. I’ve been too early three times in my time as an entrepreneur. Either the market wasn’t ready, the technology needed to evolve more, or the market didn’t exist. Underpinning all three scenarios was timing. When I had my affective computing startup, Netek, I remember telling my team that we were too early and we might not make it because of it.

Fast forward six years, and today AI is driving a lot of people to start businesses that leverage the technology. Case in point, a few days ago I shared an article with a friend who’s a therapist that lists Y Combinator Startups That Could Be The Next Tech Unicorns. One of those startups is called Sonia, an AI therapist. She responded immediately, and said “Wow! This is what I wanted to do years ago. There are many startups with advanced technologies and capital, it’s one of the reasons I haven’t jumped on this. ”

I responded: being first doesn’t matter, being better does.

It’s not as simple as it sounds, of course. My point is there’s this belief that you’ll fail because you’re not first to market, that others have a head start. Yes, there are many AI therapist startups, but none of them has cracked the code.

In general, there are conditions where being first matters, and when being late but better matters.

When it applies:

  • Markets with room for improvement: In markets where the initial offerings are imperfect or have significant flaws, being first may not matter as much as being better. If you can introduce a superior product or service that addresses the shortcomings of the first-movers, you can potentially gain market share and even overtake the pioneers.
  • Rapidly evolving technologies: In industries characterized by rapid technological advancements, being first may only provide a temporary advantage. If you can leapfrog the competition by introducing a more advanced or innovative solution, being better can outweigh the head start of the first-movers.
  • Winner-take-most markets: In markets where network effects or platform dynamics are strong, being better can be more important than being first. Users tend to gravitate towards the superior product or service, even if it comes later, as long as it provides a significantly better experience or value proposition.

When it doesn’t apply:

  • Markets with high switching costs: In industries where customers face high switching costs or lock-in effects, being first can be a significant advantage. Even if a better solution emerges later, customers may be reluctant to switch due to the associated costs or disruptions.
  • Monopolistic or oligopolistic markets: In markets dominated by a few large players with significant barriers to entry, being first and establishing a strong position can be crucial. Late entrants, even with better offerings, may struggle to gain a foothold against entrenched competitors.
  • Markets with strong network effects: In markets where network effects are extremely strong, such as social networks or communication platforms, being first and building a critical mass of users can create a self-reinforcing advantage that is difficult for later entrants to overcome, even if they have better products.
    Regulated or patent-protected markets: In markets with strict regulations or strong patent protection, being first and securing the necessary approvals or patents can provide a significant competitive advantage, even if better solutions emerge later.

In the case of my friend, AI therapist startups are racing to be the first to get it right no dominant one exists.


Bottom line: First-mover advantage is not an undeniable truth in business, because being first is not the same as being best. Timing matters more than being first!

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