Mindaugas Čaplinskas is Cofounder and Strategic Advisor of IPRoyal, a leading residential proxy provider.
Statistically, there’s a better chance of winning when you have the initiative. Taking the pole position in races, having the first serve in tennis or starting as white in chess are all often said to give a significant advantage.
Yet, life and business aren’t a zero-sum game where the winner (or first mover, to be more precise) takes it all. For some founders, delaying their start might be a more optimal strategy for reaching the best results with the least resources. I’ve seen this firsthand. My company entered the proxy service space in 2020, and by that point, several major players had a strong foothold in the industry and a pretty sizable advantage against any newcomer.
However, we’ve managed to catch up relatively quickly by learning to leverage late-mover advantages. For some businesses, entering a market “late” can save them from the costs of moving first or make it easier to enter saturated markets.
Leveraging Advantages Of Being A Late Mover
Late-mover businesses, also known as “late followers” or “later market entrants,” are companies that, intentionally or not, have delayed their market entry to gain certain benefits. They should be differentiated from market pioneers and early followers, which aim to harness the benefits of early entry.
Most benefits of late moving revolve around lower research, development and customer acquisition costs. Different business models can be applied depending on what late-mover advantages the company or product is aiming for. It’s also highly market-specific, but some strategies can be applied in multiple contexts.
Vertical Software-As-A-Service
Vertical software-as-a-service (SaaS) businesses cater to customers in specific, often highly specialized niches. In such cases, deliberately slow development can be advantageous because moving early might not provide the benefit of an already formed market with clear signals about which segments are most profitable.
Early pioneers often take a horizontal approach, testing different audiences and product features to see what pays off. A late-mover business has the advantage of creating a brand that appeals to the needed audience. An early mover with a horizontal customer base might struggle when adapting their brand to a specific market segment.
Many late-mover companies have achieved success with this strategy in profitable niches, such as business-to-business SaaS. Toast is one example of this strategy. It is a U.S.-based point-of-sale (POS) provider for the restaurant industry that entered the POS market late but now offers a leading product. The company’s late entry allowed it to enter a market with the features the restaurant sector specifically needed.
Adjusting To Technology Adoption Cycles
Technological innovations can be generally broken down into a few segments: early adopters, early majority, late majority and laggards. Late-mover businesses often target the late majority of customers. In popular examples, these customers are older, less tech-savvy users, but that’s not always the case. The technology adoption cycle varies based on the context. The adoption of blockchain technology and smartphones, for example, differs greatly.
Your strategy on which customers to target should change as well. Extensive knowledge of the market’s technology adoption cycle is crucial for understanding the best entry time.
For example, my company’s strategy for the already saturated proxy market was to cater to a larger segment of late adopters. We leveraged straightforward pricing policies and concrete use cases for our products. Early competitors had to invest money in products that weren’t essential for the majority of users, educate markets and undergo expensive research and development cycles. Their brand awareness had a head start, but many non-essential features and other risks raised prices. We were able to improve the main product and provide guidance on use cases for our customers. This allowed us to gain a foothold in a seemingly saturated market and build long-lasting consumer trust.
Practicing Strategic Patience
For every successful innovation, there are dozens of failed prototypes. All of them cost resources to develop. This is, perhaps, the most obvious benefit of late moving into various markets. Late movers have the data to back their decisions, while their competitors had to spend money on mistakes.
Strategic patience is the virtue of CEOs who direct late-moving companies or products. They need to overcome the pressure of employees, board members and investors to convincingly argue that waiting before entry is still more profitable than taking action. Of course, at some point, you must take action.
Until then, patience pays off for deciding whether a market change is a trend or nothing more than unfounded hype. Such a strategy can often be seen in technology firms, where some innovations only appear as game-changing. Sometimes, it is better to let your competitors invest millions in finding it out.
Apple is one of the most famous late movers. Companies like BlackBerry, Nokia and others made smartphone products before Apple released the iPhone, but Apple is now synonymous with smartphones. The company’s late-mover advantage enabled Apple to surpass its competitors by bidding on design, user experience, ecosystem integration and premium positioning. This allowed Apple to adapt to technologies that followed and turn its late entry into decades-long market domination.
Prioritizing Long-Term Growth
The strategies of aiming vertically, adjusting to adoption cycles and strategic patience can all be supplemented and changed depending on a company’s situational needs. Making a choice requires approaching late-mover advantages by prioritizing long-term gains for building a lean and profitable company.
While early movers often seek high-risk, high-reward opportunities that might attract venture capital investors, it’s not always a viable long-term strategy. At some point, they still need to switch away from innovation and create a more sustainable business model. The strategic decision for CEOs and investors is when to prioritize each aspect of business growth. The examples above show that, sometimes, it’s beneficial to start as a late mover.
Building a solid foundation as a late mover can not only build a sustainable business model but also act as a launching pad later on for innovation. Nothing is stopping a healthy company from taking some later risks and being the early mover in some strategic niches.
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