Distribution & Complementary Assets vs. First-Mover Advantage

July 29, 2008

I went online today to buy my best friend’s romance novel, Reckless, at Amazon.com. The first thing that came up upon going to Amazon was an advertisement for “Kindle: Amazon’s Revolutionary Wireless Reading Device.” E Ink ‘s first electronic reader customer was Sony, for the Sony Reader, released in September, 2006. Kindle wasn’t released until a year later (also using E Ink’s technology), but Kindle advertised access to 140,000 titles as opposed to Sony’s 10,000 titles(Sony looks like its bookstore now offers 50,000 titles, and in December 2008 Sony & Borders co-branded their eBook Store). While the numbers of Kindles and Sony Readers sold is not definitive, it would seem that probably more Kindles have been sold than Readers, despite the year lag. 

It could be that Kindle is a better technology, although there are plenty of customer reviews on both sides, but repeatedly there are two forces that it doesn’t hurt to have on your side in order to defeat a first mover advantage: distribution and complementary assets. We’ve seen this with TiVo vs. the cable companies set-top box DVRs (I wrote a chapter about this), where a sufficient but worse product sold more units than a better first-mover due to incumbent position in the home and a superior distribution channel and complementary asset (cable access and the cable installation network). We’ve also seen this with the Browser Wars (I wrote a paper & a chapter about this), where Internet Explorer overcame Netscape’s lead in the browser market with the help of distribution through exploding PC sales & Windows as a complementary asset to control access to that channel of distribution.

So it’s not always sufficient to build the first or a better mousetrap (in itself, another story about complementary assests overcoming first mover advantages): figure out how to get distribution and complementary assets on your side.