A playbook for Generating Business Ideas

Second Mover Advantages
There are a number of advantages that come with “doing what’s working.” The
“second mover advantage” is the advantage a company gets from following
others into a market or mimicking an existing product.
Being a “first mover” (entering a new market, solving a new problem, or
providing an entirely different solution) is often attractive to entrepreneurs and
investors because of the upside potential and ability to capture and sustain
market share. However, being the first to market with a wildly innovative idea is
also risky. You don’t know (1) if customers will view your product as valuable,
(2) if it’s something that customers can/will buy, (3) how to acquire customers,
and potentially (4) if it’s even a problem worth solving in the first place, or if
anyone even has the problem.
Below are four advantages to being a second mover. Second mover

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disadvantages are covered at the end of this section.
a. Customer Validation
From an existing company or competitor, you can learn what customers want.
Seeing that an existing company (your competitor) is selling products shows that
there are people who want to buy the products. Building something people want
is a theme of this book. Building something people want is at the very core of
any business. All of the strategies discussed in this book optimize building
something people want.
A competitor with traction provides some validation that some group of people
has the hypothesized problem, and that those people view the solution as
valuable. Therefore, you reduce the risk that no one wants your proposed
product. I would rather bet that a group of people would be willing to buy
“Product A” if I knew that there were people that have already bought “Product
A“, than a “Product B” that no one has ever seen before, let alone used or paid
for. You can be more confident that you are supplying something that customers
have demand for.
b. Product Management and Marketing
A company launches their product to a market, and if they’re smart, they will be
testing and optimizing the product based on user interaction data. For example,
they might adjust the copywriting on their landing page to see which will yield
the highest conversion rates. The company will then stick to using the
copywriting that converts best. There are many other components of a product or
website that companies will test and iterate on.
By analyzing the product and marketing of a company that is already in the
market, you can learn about what works best. This saves testing and optimization
time, and helps you build a product that more closely meets customer needs.
Other examples of product management features include CTAs, user onboarding
flows, copywriting, highlighted value propositions, marketing conversion
funnels, specific product features, and more.

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Just because it’s working for the other company does not guarantee that it will
work for you, but it is probably more likely to work for you than something else
that has never been validated.
c. Customer Acquisition
Through some research, you can often learn about how companies acquire
customers. Figuring out how to acquire customers in a repeatable and profitable
way often requires testing multiple channels, which costs time and money.
Analyzing how the first mover acquires customers can guide your strategy. You
can also learn from their sales messaging and copywriting. This can help you
avoid running multiple marketing channel experiments, which can save you time
and money, and skip to focusing on the channels that work.
You may not be able to tell what channels the first mover has tried and found to
be unprofitable or unsuccessful. It’s also possible that the company has not had a
chance to try a given marketing channel that you think might work. You don’t
need to let a first mover guide your entire strategy, but it can at least be a guide.
d. Procurement
If it’s a new market, the marketing and sales your competitor does may help to
educate customers of the value of your products and actually expand the market.
This would be especially valuable if it’s a market where customers would buy
more than one product. In a market where customers have high loyalty to an
existing and inferior solution, the first mover may do the heavy lifting of getting
customers to start thinking about switching.
An example of this might be online education. It seems people still don’t see it
as a socially acceptable option, or, prior to a few years ago, didn’t even know it
was an option. As more companies enter the online education market, and launch
marketing campaigns, more people become aware that online education exists.
As more people start using online education, it becomes more socially
acceptable to pursue education online.
This procurement process could take years. Being a first mover would require

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you to wait through this procurement, which costs money. By being a second
mover, after the procurement process has started to take hold, you can save time
and money. A dollar today is worth more than a dollar tomorrow.