Time Takes Its Toll

  • Share
  • Read Later

By ZANG HAILINGChina has a popular saying: whoever enters first becomes master. That saying is popular in the world of business as well. In traditional marketing theory, teachers tell students that one of the strategies for a business to improve its profit is to find a void in the market, fill it, and then dominate it. The advantage of the so-called first mover is again being stressed in today's world of e-commerce. But the frenzy for immediacy obscures an important consideration: continued mastery of a market requires more than just dominating the initial competition. It is also essential for a company to focus on trimming an important but under-appreciated cost the consumer's time.

In the world of economics, there is a concept called opportunity cost. When you do A, you lose the benefit of doing B. The benefit of doing B is the opportunity cost of doing A. If such a cost is too high, you quickly abandon A. Opportunity cost is based on a fact that ought to be self-evident: people's time is limited. For most of us, this accounting may be subconscious, but it can be shown that such a cost really exists in people's minds.

There are few more enduring proofs of first-mover advantage than qwerty, which comes from the arrangement of letters on the first typewriters, and continues on computer keyboards used today. The order was not based on the easiest way for fingers to move; quite the contrary, it was to reduce the speed of typing. If the typist was too fast, the metal supports holding the letters would jam. That problem was solved decades ago, but qwerty lives on because to unlearn it and absorb a new, more efficient arrangement of letters would require an enormous sum: customer time multiplied by all the world's keyboards.

But first movers don't always come out on top. In China, a word processing software called wps was introduced well before the arrival of the Microsoft Office family into China's software market. In the late 1980s and early '90s, wps dominated, but people had to spend time to learn how to use it. Then along came the more powerful Microsoft Word, making it unnecessary to memorize a combination of keys just to produce a single character. In a short while, people switched to Microsoft Word and wps gradually lost its dominant position in the Chinese marketplace. Microsoft succeeded because it had managed to lower the time cost how long it took a consumer to adapt from one system to the other to almost zero.

So the next time you read about the latest, red-hot e-commerce company about to take the world by storm thanks to its first-mover advantage, remember the much-overlooked cost of both becoming familiar with, then using a new product. It plays an important part in whether a consumer chooses or rejects a new product. The shorter time the consumer spends learning, the wider the product will spread.

Zang Hailing is a graduate student at Shanghai's Fudan University. This is an excerpt from her entry in the students' competition for the ISC Wings of Excellence Award given annually at the International Management Symposium, St. Gallen