Gunjan Doshi

If you are first in the market and gain a significant market share, you have the best chance of retaining the market share. This is also known as ‘first-mover advantage’.

For e.g., AOL Instant Messenger (AIM) was the first one to comeup with a branded instant messenger. Several other vendors like MSN and Yahoo released their version of instant messengers. However, since AOL’s instant messenger was the first to market and had gained significant market share, it managed to retain its market leadership. According to Nielsen media ratings, here is the market share:

AOL Instant Messenger: 51.5 million members
MSN Messenger: 27.3 million members
Yahoo Messenger: 21.9 million members

So, how do you retain the market share? Continuously innovate the hell out of your product and make it simple and economic with every iteration. In short, do not get fat and lazy with your success.

A case in hand: at one point Motorola manufactured half the world’s cell phones. It was a clear market leader. However, the success made the company lazy; it failed to innovate. Eventually, it lost its leadership to Nokia over the period of time. I think Motorola is one of the rare examples where the company learned from its mistakes and made a comeback with the Razr line of phones. To regain the market share from your competitor is very challenging as your competitor knows the rules and is working hard.

The company that is successfully avoiding the trap is Apple. There are many Ipod mini-me’s out there right now. But, no one is able to produce a Ipod killer as Apple keeps innovating and delighting the customers.

I think lot of engineering companies fail miserably on this front. They are so focused on technology that they fail to think about the end users. Especially, if you are the first in the market, but have a complex product with expensive pricing, you will loose soon. For e.g. Sony developed VHS format and sold it to JVC, who later made VHS an open license. Sony thought it had a superior format called Betamax. It is true that Betamax had better quality than VHS. However, it was very complicated for average user. In addition, Sony locked down the Beta format. While VHS was simple and had an open license on it, everyone came out with cheap VHS players. The mandate from people was clear: Sony introduced the Betamax home video system in 1975. At one point, it had almost a third of the UK video recorder market. However by 1985 the market had turned sharply towards VHS.

To summarize:
1. If you are first to market and have significant market share, congratulations!
2. Do not get fat and lazy with your success. Continuously innovate and strive for simplicity and lower costs.
3. Do not be technology focused, be user focused.

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