Through my first five years as an entrepreneur, I was constantly trying to come up with new concepts – new “basics of life,” ideas the world had never conceived of. This was one of the biggest mistakes of my entire career, in terms of direct success – but it was invaluable in terms of learning about entrepreneurship.
Why is it a bad idea to try to come up with something totally new? As a startup, your chance of succeeding as a “first mover” are almost zero. I know, I know, business schools teach all about the importance of the “first mover advantage.” In the real world life of entrepreneurs, it is better to be a “second mover.” Here are the three main reasons, as I see it.
1. First movers ordinarily need enormous resources
To develop a new and basic concept into a viable business takes time and money – a lot of both. If you’re a struggling new start-up company, resources are scarce. You’re not in a position to slog through a lengthy, ex- pensive development process. In fact, the time and costs of development are likely to kill you long before you break through with a viable product and business model. That may sound pessimistic, but why sink your valuable resources into something that offers so little chance of success? We are all about increasing our revenues, not depleting our reserves.
If you have a great idea that you just know could be a world-class success (with sufficient development), by all means, hang onto it! Hang onto that space ship or flying car or world-saving plan until after you’ve made your first million-billion exit!
2. There’s no existing market
When you set up to develop a brand new and basic idea, you do not know for certain that there will eventually be a market for the resulting product or service. In other words, you face the considerable risk that there will be no significant market when you’re ready to launch. Even if there may eventually be a market, no tested and ma- tured market will be in place to greet your launch. This can make your odds for success more difficult. It is more
expensive to teach the world they need your product/service versus selling to a population that already recognizes the need.
3. A new idea requires a lot of testing
Because you’re the first with your idea, you will need to do extensive testing to discover what works and what doesn’t. This takes time and resources you’re unlikely to have, if you’re starting from scratch.
In other words, as a first mover you face a huge risk that you will exhaust your resources before you can achieve a break- through with your idea, and become profitable. It’s better all around for a brilliant start-up to be a second mover, entering a market already proven by a competitor, but with ample room remaining for a new player offering improvements on the existing products or services. This is the proven and less-expensive route for building and executing a brilliant idea as a start-up.