Why do pioneers tend to fail?

October 14, 2014

c-columbus-1Gerard J. Tellisv, in The Columbus Effect in Business, writes that “Pioneering is glorious, but later entrants are often the ones who see the true potential of discoveries.”  We made a similar point on Columbus Day two years ago:  though conventionally thought of as an explorer, Columbus might more accurately be described as an enormously influential (and lucky, perhaps even failed) entrepreneur.  Not only did he fail to achieve a blow-out IPO, he couldn’t even get the results of his project named after himself.  Here’s how Tellisy puts it:

Christopher Columbus will be feted in many places on Monday as an intrepid explorer, reviled in others as the spearhead of European colonization. But the Genoese ship captain who in 1492 sailed west to parts unknown might be best considered today for what he can tell us about ourselves. The man who successfully pioneered direct cross-Atlantic navigation also died dispossessed and embittered. In this respect Columbus represents a type, not an exception: failing pioneers.

Many scholars believe that pioneers are highly successful, have a high market share, and are long-term leaders of the markets they pioneer. Yet historical analysis shows that pioneers mostly fail, have a lower market share and rarely lead their industries. Long-term market leaders seldom are pioneers. Rather, they are ones who appreciate the discoveries of pioneers, envision the mass market and exploit it profitably.

Columbus might have fared better had he worried less about the idea and more about the execution.  As John Greathouse once put it (in the May 2012 issue of Forbes):

The second time Christopher Columbus pitched Ferdinand and Isabella (two years after his initial presentation – raising money has always taken patience and persistence), he did not need to convince them that locating a shortcut to the spice routes of India was a good idea. Rather, he had to belie their primary concerns: was he honest, tenacious and competent enough to execute the journey?

The same is true of entrepreneurs and their backers:  we want to hear about the idea – the details in the pitch reveal important things about the entrepreneur  – but the intangibles in a good long-term partnership are primary:   integritytransparency, trustworthiness, enthusiasm and tenacity, self-awareness, and flexible persistence.

Tellisy makes another point that is a favorite of ours:  business history is full of surprises.

Today’s market leaders in many categories didn’t pioneer those categories. Microsoft didn’t pioneer personal-computer operating systems (QDOS came before) or word processing (WordStar and others came before). Amazon didn’t pioneer online books stores (Books.com came before). Apple didn’t pioneer mobile music, the smartphone, the tablet ( Sony , BlackBerry and others came before). Google didn’t pioneer Internet search (AltaVista, among others, came before). And Facebook didn’t pioneer online social networks (Myspace came before).

Here’s how we covered the topic in Outcomes that feel ordained only in retrospect:

A few of the stories of these companies’ origins may ring a bell (DuPont began as a manufacturer of gunpowder, Berkshire Hathaway of textiles) but more than a few will likely surprise you:  Avon started as a book seller, Nokia in wood pulp, Wrigley in soap and baking powder, McDonald’s as a drive-in BBQ, 7-Eleven as an ice house, and Coleco made shoe leather (Connecticut Leather Company) long before it did Cabbage Patch Kids and video games.

The common theme to all these Origin Stories?  Business conditions may ebb and flow, but good managers adapt.  Tellisy, again:

Why do pioneers tend to fail in the long run? For the same reason that Christopher Columbus didn’t flourish despite his initial success: Pioneers too often cling to their initial intuition, just as Columbus clung for too long to the notion he had reached India. Pioneers focus on the small initial market, failing to envision the vast mass market that they just opened up. Pioneers stick with the initial product even when the market demands relentless innovation. All the while, a surge of later entrants learns from mistakes of pioneers, envisions opportunities and rides on the explosion of new superior technologies.

 

© 2017 Ballast Point Ventures. All rights reserved.