Your product doesn't have to be first

When you talk to some venture capital investors, there is a focus on being first in a market and gaining as much share as possible. While the Get Big Fast strategy may be a path to a good venture-capital investment, it may not be the best way to build an enduring company. Sometimes, it’s better to be second, like Apple.

At the time, Xerox had an astounding 80%+ share of the worldwide copier market. Xerox back then was as ubiquitous as Google is today. If you want to search for something today, you say, “I’ll Google it,” back then, when you wanted to copy something, you said, “I’ll Xerox it.” The word “Xerox” is in the dictionary as a verb.

The investment was a coup for Apple, but Apple CEO Steve Jobs added one provision to the deal: a team from Apple would be able to tour Xerox’s famed Palo Alto Research Center (PARC). Xerox was happy to oblige and let Jobs and his team walk through and observe a true R&D operation at one of the world’s most successful companies.

Xerox showed off several key projects that were in development, including a graphical user interface (GUI) and this thing called a “mouse.” At the time, computers were controlled through a command line interface. With a command line interface, the computer sat there with nothing on the screen except a blinking cursor. There was a basic set of commands you would type for things like copying a file (“copy”) or changing the directory (“cd”) (directories are now known as folders).

With the GUI, pictures or icons told story the much like they do today. Click (using the mouse) on an icon and things would happen. It was revolutionary, but it was also buried inside of a high-end research facility, until Jobs got a look.

A few years later, Apple computers broke through with a GUI and mouse as the way to do things. Apple did not invent personal computing, it was not first to market, but what it delivered with its Lisa and then Macintosh computers was world changing.

What about the iPhone? You guessed correctly, Apple’s iPhone was not the first smartphone in the market. Palm Pilot, Nokia, LG, Motorola, and others were in the market with smartphones and some even had touch screens. The iPhone bundle of touch screen, camera, web browser, and sleek design combined with the Apple marketing machine, made the iPhone one of the best-selling consumer electronic devices of all time. But Apple was not first to the market with a smartphone.

Doing Apple one better was Android. Android was an open-source software model, meaning most anybody can contribute to the “project” to improve it or fix bugs. The Android operating system for phones was not even released until the iPhone had been on the market for more than a year. Android was not first, but Android today controls about 70% of the worldwide smartphone market, compared with Apple’s 30%. (Google acquired Android in 2005.)

What does all of this tell us? For those that play the long game, there are huge rewards. If the focus stays on creating a superior product at a competitive price, you don’t have to be first to market.

Nothing like some live market research to arm yourself with valuable information.

I don’t think Steve Jobs went to the Xerox PARC facility with the intention to stumble upon a technology Apple would embed and make integral to computing. But, as a player in the nascent and rapidly changing personal computer industry, he kept an eye on his market and was always doing live research to figure out how to become and stay as the market leader while others were running trying to Get Big Fast.

Key Takeaways

• The rise of the Internet over the last 25 years has warped our sense of timing. It still takes time and effort to conceptualize, build, and market a good product or service. Just because you can instantly email or text somebody or pull down information from an AI tool, it does not mean your product-development cycle should be shorter.

• I have heard many investors express frustration and get turned off when a company says, “We are unique and don’t have any competitors.” It’s just not ever accurate. Focus should be on how your offering is differentiated from other products in the market, but just as importantly, how your product is differentiated from indirect competition and substitutes. (See last week’s post about how Henry Ford did not claim to be the only car maker, but he differentiated his product on price by innovating his assembly line and management of his workforce.)

• Many investors shy away from the second-to-market company because they want something that is first and can Get Big Fast. The motivation of these investors is to build a product that can acquired by a bigger company, not to build a successful long-term business.

Things I think about

Pharmaceutical companies make more profits than all other healthcare companies combined.

Recommended reading

How to Succeed in a High-Stakes Interview
This is my free 30-minute video course on interviewing and presenting.

The Art of the Start 2.0
By Guy Kawasaki, original marketing evangelist at Apple.

Antifragile: Things That Gain from Disorder
From the author of The Black Swan. You will learn to think differently after reading this.

Weaving the Web
The original design and ultimate destiny of the World Wide Web (by Tim Berners-Lee, inventor of the Web).

The Four
The hidden DNA of Amazon, Facebook, Apple, and Google.