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The Perils of Being First May 6, 2007

Posted by Brad in Entrepreneurship, Ideas.
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In light of the discussion floating around in business today regarding the necessity of an incredible idea when starting a business, The Wall Street Journal published an article pointing out the downside of being the first one to market with an idea. The article is based around a company named Sambazon which imports the pulp of the nutritious acai berry into U.S. Markets. Much of the article is a business profile but the really important part takes place in this editorial aside:

One cornerstone of entrepreneurship is to be at the forefront of trends, pushing the envelope to find and deliver the next big thing. But being ahead of the pack can also be a tough place to be, and — as the story of Sambazon shows — being first can be even tougher. From educating consumers to outmaneuvering new rivals and perfecting packaging, trailblazers like the Blacks face a raft of challenges.
“The first guy on the beach usually gets shot,” warns Jeremy Black. “That’s the danger when you are a small guy, a pioneer.”

I think the important thing to be gleaned from this statement is not the difficulty of being a pioneer, but the importance of developing a competitive advantage; building a moat of quality, service, or innovation that separates your company from competitors and gives customers a reason to choose your product or service. Dick Costolo, the CEO of Feedburner articulates a critical point in his blog discussion of strategic advantage. Costolo postulates that:

A company’s strategic advantage is based around Quantum Hidden Barriers to Entry… Of course, hidden barriers to entry are those great things that cause lots of people to look at what you’re doing and say “that’s simple, I could do that”, only to realize that the more work they do to try to copy your solution or position in the market or whatever, the more they realize they are farther and farther away from what you’ve accomplished…

Hidden barriers to entry are particularly helpful to your company because potential competitors will severely underestimate the level of investment and resource commitment required to compete with you. I cannot tell you how many times since we first launched FeedBurner I have heard the following comments from senior executives at large companies, industry pundits, hobbyists, and my five year old son: “We could build FeedBurner in [a weekend, three months with three people, whenever we wanted]”. When you have hidden barriers to entry, you don’t get too worked up about these kinds of comments because you know there are lots of pitfalls and issues and challenges that you don’t understand fully until you are far enough along in development that you stumble into them and think “oh wow, now what do we do”… [Read More]

It’s important to realize that these hidden barriers to entry are one of the key reasons that it is more important to just begin working on something and to hash it out by doing than to over-plan and attempt to perfect an idea in theory and on paper before working towards solving the problem in practice. Having the perfect idea or being first to market has less direct influence and less importance than is often thought. The real benefit of being first to market it seems is being the first to work through and solve the hidden barriers to entry. Thoughts?

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