Need a winning strategy for the Internet? Just exploit the “first-mover advantage,” say consultants and industry analysts. The concept, which hearkens back to tic-tac-toe, is based on the notion that in everything from children’s games to high-stakes business showdowns, the person who acts first can seize command and go on to conquer all.
As first-mover fever becomes this year’s version of the Macarena, Fast Company’s Consultant Debunking Unit (CDU) has been asking some tough questions about the concept’s validity. The more the CDU has learned, the more we’ve started having, well, second thoughts about the whole idea.
Until a few years ago, first-mover theory was limited to academic journals. But then the Internet gave the metaphor a second chance. Journalists and market researchers used it to explain the rise of such upstarts as Amazon.com, which was said to have made crucial business moves before anyone else.
Before long, consultants around the globe were urging their clients to jump into new areas of business. In Germany, Booz-Allen consultants Hardy Koth and Gaby Wiegran told their clients, “You have a great opportunity to become the first mover in your space. Seize it!” Such exhortations became so common that late last year, Internet analyst Barry Parr of International Data Corp. declared, “First-mover advantage has become religion in the industry.”
But if Amazon is the Internet’s first-mover role model, was it really the first to be first? With that question in mind, the CDU contacted Robert Spector, author of Amazon.com — Get Big Fast: Inside the Revolutionary Business Model That Changed the World (HarperBusiness, 2000). “The Computer Literacy bookstore [now Fatbrain.com] in Berkeley registered its Internet domain name in 1991,” Spector says. “Even books.com [which was bought out by Barnes & Noble last year] acted a full year before Amazon did.” The awkward truth: Amazon was fourth.
Still, the CDU was willing to give the first-mover argument a second look — in the world of games. If getting to go first gives a player a huge advantage in tic-tac-toe, can the same be said for more complicated games — such as bridge, chess, and baseball? According to Alan LeBendig, a 36-year bridge veteran and a Los Angeles – based Life Grand Master, not playing first can be a great advantage. In fact, LeBendig says, top-flight players often look to set up “squeezes,” whereby their opponents are forced to go first — and make plays that can only help their rivals.
In chess, the ballyhooed advantage of playing white and making the first move really isn’t so great after all, says Tom Brownscombe, scholastic director of the U.S. Chess Federation in New Windsor, New York. “It’s easier for white to go on the attack,” Brownscombe says, “but there’s a whole school of play, known as hypermodernism, where black allows white to get a huge advantage in space, on the belief that white can’t maintain that, and will leave room for counterattacks.”
In baseball, it’s hard to find much trace of a first-mover advantage. Home teams get to bat last, which can be a decisive advantage when the lead changes hands frequently and the game stops only at the end of the home team’s final at bat. And in late-inning substitutions, the team that moves first often depletes its bench, leaving itself vulnerable to the opposition’s countermoves.
After studying such real-world examples, the CDU was ready for an extrarigorous review of the first-mover concept by a leading academic expert in game theory: Avinash K. Dixit, a Princeton University economist who has cowritten two books on game theory. His assessment: The world has so many different situations that “a good strategist will examine each situation on its own merits, without a presumption of first- or second-mover advantage.”
Going first may work well if it involves setting up a big manufacturing plant that can fully serve a market, leaving little room for profitable competitors, Dixit says. But Dixit also notes that there are plenty of businesses that find themselves in situations where they definitely don’t want to go first. Take, for example, the catalog business: “If Lands’ End could print their catalog after L.L. Bean had already printed and mailed out theirs, then Lands’ End could undercut L.L. Bean slightly on every item and get a large share of the market,” says Dixit.
With contrary evidence piling up, the CDU wanted to make a last-ditch attempt to salvage some credibility for the first-mover theory. That meant contacting the American Moving and Storage Association (AMSA), in Alexandria, Virginia. When people are moving to a new home, should they hire the first mover that they happen to contact? “We encourage people to call around and get at least a few bids,” says George Bennett, communications director for AMSA.
Interstate moving rates are no longer fixed, and rival shippers are free to compete on price. In fact, Bennett says, second movers and third movers may be in an advantageous position, since they can learn about a first mover’s quote and then decide to undercut that amount by a few dollars to get the business. So even in moving, it turns out, there’s no first-mover advantage.
Contact Tom Brownscombe (firstname.lastname@example.org), Avinash Dixit (email@example.com) or Alan LeBendig (TheBarrBC@aol.com) by email.