1. Entry Timing (First mover Advantages)

2. Agenda  Timing of Entry Demand and technology uncertainty First and Second mover advantages

3. Innovation and uncertainty  Technological uncertainty  Uncertainty regarding the technological features of the product  Standards  Dominant design  Market/Demand uncertainty  Uncertainty regarding the size and growth rates of the markets for new products  Potential uses  Substitute products  Complementary products

4. Back to Takeoff timings Sales Firms

5. Resolution of Technology and Demand Uncertainty timeInventionCommercializationFirmTake-OffSalesTake-Off Technological Uncertainty Resolved Demand Uncertainty Resolved

6. When should firms enter? timeInventionCommercializationFirmTake-OffSalesTake-Off ???

7. In-Class Activity Synthes Case Discussion

8. When to enter  Importance of lead time (the degree to which innovation can be protected)  The nature of risk and the ability of the firm to manage it  The importance and availability of complementary resources  The potential to establish a standard

9. First mover Advantage (?)  A first mover is a firm that takes an initial competitive action.  Advantages of first movers If successful, the firm earns above-average returns until other competitors are able to respond effectively. Develop customer loyalty.  Harley-Davidson has been able to maintain a competitive lead in large motorcycles due to intense customer loyalty.  Disadvantages of first movers High risk High development costs High demand uncertainty

10. Second mover Advantage (?)  A second mover is a firm that responds to a first mover’s competitive action often through imitation or a move designed to counter the effects of the initial action. BankOne (Internet banking); New Balance (athletic shoe industry)  Advantages of second movers Reduction in demand uncertainty Market research to improve satisfying customer needs Learn from the first mover’s successes and shortcomings Gaining time for R&D to develop a superior product  Disadvantages of second movers Loss of opportunity to establish brand loyalty If significant learning curve through moving first, then giving up competitive advantage

11. When to enter a market: First mover (dis)advantage Advantages Above-average returns until other competitors respond effectively Start down the learning curve earlier Opportunity to gain customer loyalty Opportunity to set standards Disadvantages  Uncertainty about demand  High development costs  Risk of adopting a losing standard (Beta/VHS)

12. Moving Second: Imitate and counter Advantages Reduction in demand uncertainty Market research to improve satisfying customer needs Learn from the first mover’s successes and shortcomings Gaining time for R&D to develop a superior product Don’t have to educate consumers Disadvantages  Switching costs may make taking customers difficult Brand loyalty/customer familiarity Standards  Initial cost disadvantage: May not survive until learning curve advantages have leveled out

13. Success of leaders and followers PRODUCTINNOVATORFOLLOWERWINNER Jet AirlinersDe Havilland (Comet)Boeing (707)Follower Float glassPilkingtonCorningLeader X-Ray ScannerEMIGeneral ElectricFollower Office P.C.XeroxIBMFollower VCRsAmpex/SonyMatsushitaFollower Diet ColaR.C. ColaCoca ColaFollower Instant CamerasPolaroidKodakLeader Pocket CalculatorBowmarTexas InstrumentsFollower Microwave OvenRaytheonSamsungFollower Plain Paper CopiersXeroxCanonNot clear Fiber Optic CableCorningmany companiesLeader Video Games PlayersAtariNintendo/Sega/SonyFollowers Disposable DiapersProctor & GambleKimberly-ClarkLeader Web browserNetscapeMicrosoftFollower PDAPsion, ApplePalmFollower MP3 music playersDiamond MultimediaSony (&others)Followers

14. Key Take-aways  Timing of Entry Comparing first and second mover advantages Demand and technological uncertainty is key to decision making Entering early may give better potential to set standards in industry