Former Industry Leaders That Squandered Their First to Market Advantages And Got Outmaneuvered By More Innovative Companies

Sitting at long tables surrounded by pizza boxes, their determined faces warmed by the glow of screen glare, dozens of computer programmers frantically tap away on their keyboards as they slam shots of energy drinks.

This image comes to mind when we imagine a team of software developers hammering away on a product launch before the competition steals their thunder. 

The history of innovation in technology shows companies that didn’t necessarily make a product first or best but made it the biggest are the ones that win. 

Yet the first-to-market story is a recurring theme in the elevator pitch of every Internet pioneer that laid claim to uncharted territory. Popular wisdom supports the assumption that unconquered markets go to the first capitalist to discover and exploit them. 

However, as we have learned from Polaroid, Kodak, Netscape, MySpace, and others this isn't always the case. Whether it's ego, a lack of vision, blind spots, pride, or fear, business leaders are people. They make colossal strategic blunders. Yet, for those of us on the outside looking in, spectacular missteps will continue to baffle and amaze us. 

Look at Blackberry. It was so married to the proprietary everything model that it missed the smartphone transition and its connection to an ecosystem of service providers on an open platform.  

Or take whomever it was at Yahoo! who decided it was a bad idea to buy Google. That person is likely to be in hiding, living under a false identity bearing a phony passport. But before we rush to judgment, let’s acknowledge that hindsight is twenty-twenty vision. We don’t know all the emotional, psychological, financial, political, and economic factors that were in play at the time and how they factored into the decision not to act. Greed and self-interest are other factors operating in the background. 

Sometimes the company is married to outdated technology. Executives who championed it are defensive of the investment and don’t want to be wrong. Look at the first instant camera. Like any new hardware, it had an innovation cycle. 

In the 1950s and 1960s, Polaroid cameras became smaller and more popular. With the introduction of the Colorpack camera in 1963, sales peaked by the late 1960s. Kodak even jumped into the fray with its offering, using a similar design and price point. Meanwhile, while the shrinking giants were duking it out in this small pond, Nikon and Canon were killing it in the ocean of demand for digital cameras. 

The problem was, Polaroid and Kodak were innovating in the wrong space. Their focus was on making the existing technology better. This is akin to Microsoft focusing resources on Microsoft Word to compete with Google Docs instead of making a trillion-dollar play to control the future of cloud computing. 

While these legacy brands were trying to beat their own best versions of a soon-to-be-obsolete technology, a massively disruptive force in camera technology was well underway. 

Ironically, Polaroid’s most popular model with a collapsible design, the SX-70, tied up all its money. It turned out to be too expensive to keep up with demand.  At the peak of its fame, when Andy Warhol was using it for his art, Polaroid only sold 60,000 units. It discontinued the product. 

In its bid to win a dominant share of a shrinking market, Polaroid missed the digital revolution and its opportunity to become a global brand name in digital cameras. Even after achieving every marketer’s dream, making it big as a pop culture icon, consumer demand had already abandoned the technology. Quite simply, there isn’t enough marketing and creative brainpower in the world to revive an obsolete technology. 

Then there’s Myspace. What problem didn’t it have? Fickle users, culture clash, failed corporate merger. This scenario often repeats itself when larger companies swallow up innovative nimble companies. Their corporate systems and processes kill innovation.

When the acquiring company ties to fit the acquired company into its culture, it loses the entrepreneurial spirit and culture it paid so dearly to acquire. The decline of Myspace is the unfortunate offspring of the AOL and Time Warner merger. The takeaway on that deal: a high-flying internet venture gets caught in a culture clash by joining a giant media conglomerate. End of story.

By the time Second Life landed on the cover of Businessweek. American Apparel, Dell, and Reebok rushed to build virtual storefronts in the virtual world. Fast forward to 2022, and you see Wunderman and Thompson running to create storefronts in the metaverse. Reuters began a full-time second life bureau chief. By the end of 2007, Second Life was already losing its luster. No one used the stores, so it never delivered network effects by creating more value as more users joined the platform. This virtual economy never became real. 

Or let’s move the lens to focus more closely on the leader’s conundrum: an early mover company is so successful in the market it creates, that it is afraid to venture into new markets for fear of cannibalizing its core business. Yahoo! did it anyway. 

It was arguably the original mass adoption search engine, but it strayed from the core search business when it changed into an advertising-supported business model. Its media company aspirations attracted, at its peak, an installed base of a billion users. But as it morphed into a media “portal,” it left the pure-play search engine space open for Google to move in and dominate the industry. 

Although Yahoo! saw some success in fantasy sports, finance, and news applications, the new key battlegrounds were email, social, and photos, where Yahoo Mail, Tumblr, and Flickr were hemorrhaging users. 

Married to outdated technology, defensive of its investment, and operating in a bubble about what consumers want without actually talking to them, the company gradually shrunk into a shadow of itself.  

Management spent so much time and energy defending the old model that there wasn’t enough bandwidth to capitalize on new opportunities. Yahoo! won the desktop but lost the mobile war at one point. It couldn’t build high-quality mobile advertising experiences fast enough. 

Google and Facebook were making the transition to mobile more quickly. Remember when Zuckerberg held a press conference to announce that Facebook was “mobile-first” in May 2012? Some people made fun of him for being overly dramatic. Yeah, ok. Whatever they say. Now he’s making noise about the Metaverse, and everyone is laughing again. We’ll see who has the last laugh on this trend. 

Meanwhile, Yahoo! was also slow to create the capability to measure the effectiveness of ad campaigns across multiple devices.  If platforms can’t prove their value in this environment, they put themselves at a severe disadvantage with advertisers.

Yahoo! missed the transition to accountable marketing solutions. Advertisers became obsessed with tracking performance metrics on how consumers consume media and marketing messages across different devices, and it couldn’t deliver. 

Yahoo! was way too slow to recognize the impending shift to mobile and was caught flat-footed on the move toward social experiences. It failed to properly leverage its Flickr acquisition which it bought for almost nothing at a token amount of $35 million in 2005. 

If Yahoo! didn’t get in its way, Flickr could have been Instagram. Then Yahoo! tried to go big, by purchasing Tumblr for $1 billion. As so often happens when large companies buy smaller, more agile ones with innovative cultures, that merger flopped. 

In all fairness, Netscape lost to Microsoft because the latter muscled PC manufacturers into preinstalling its browser on all their products. But in the end, karma came back to bite Microsoft as Google released its Chrome browser, which was far superior, so fundamental market forces won. 

Andrew Ellenberg is President & Managing Partner Of Rise Integrated Marketing, a global management consulting firm specializing in original journalism for national distribution. To submit story ideas or inquire about our custom publishing services, email andrew@riseintegrated.com or call 816-506-1257.