Getting your market entry timing right

Article by: Menno van Dijk

Good Governance Innovative Enterprise Theory & Practice

Abstract and adaptation from Originals by Adam Grant.

Along with providing time to generate novel ideas, procrastination has another benefit: it keeps us open to adapting our strategy. Some executives formulate a strategy and then stick to it. Those that delayed this process are more flexible and versatile, able to change their strategies to capitalize on new opportunities and defend against threats. It was Mike Tyson who said, "Everyone has a plan until they get punched in the face."

Creative leaders are great procrastinators, especially when it comes to market timing.

Bill Gross started Idealab more than twenty years ago. Idealab started upwards of 100 companies, enjoying some successes and suffering many failures. Bill set off to pinpoint which factors accounted for a company's success or its failure. He took a quantitative approach to analyze 100 Idealab companies and another 100 non-Idealab companies. He found the following factors to account for most of the difference between success and failure: 1) timing, 2) team, 3) big idea, 4) business model, and 5) funding.

Good timing is taking advantage of external trends and events as they emerge. An economic downturn provides the right timing for new businesses that save people money. A change in regulation or government policy, e.g., a subsidy program for green energy, can open a window of time for new enterprise. A consumer trend, such as the Sharing Economy, creates momentum for all kinds of new companies that offer product-sharing services.

Good timing is also about readiness. One study of over three thousand startups indicated that roughly three out of every four fail because of premature scaling – making investments that the market isn’t yet ready to support. The THNK research of 1 million startups and 2000 scale-ups found that scale-ups take significantly more preparation time before they launch than the average start-up.

Good timing also deals with competitive dynamics. Does the “first mover” take all or does it make more sense to be a “fast follower”? Although “first movers” face some advantages in particular industries, the academic research remains mixed and does not support an overall first-mover advantage. First-mover advantages tend to prevail when patented technology is involved, or when there are strong network effects. In other cases, being original doesn’t mean being first. It means being different and better.

Since the market begins to be defined once the fast followers have entered, the focus is on providing superior quality instead of deliberating about what to offer in the first place. For most good things, it takes a long time to figure them out. When you’re the first into market, you have to make all the mistakes yourself. The more risk-averse entrepreneurs watch from the sidelines, waiting for the right opportunity and learn from the first errors. Where “first movers” tend to get stuck in their early offerings, the “fast followers” can play to market response and segmentation of consumer taste.

Learn how to perfect your market entry timing in the THNK Executive Leadership Program.