In business there's no advantage in being the first mover when it comes to change.
Harvard Business Review asserted that one of the best business books of 2001 was Will and Vision: How Latecomers Grow to Dominate Markets (McGraw-Hill). It's a marketing book by Gerard Tellis and Peter Golder, a pair of academics from the University of Southern California and the Stern Business School at New York University. The book's purpose is to demolish one of the most prevalent myths in business -- the ''first-mover advantage''.
Julia Gillard should buy a copy of Will and Vision for the members of her new climate change committee. While she's at it, she could buy a copy for Marius Kloppers as well.
The myth of the first-mover advantage persists because we want to believe it's true. We think that the person who's the first to take a risk should get a benefit. But the point of Will and Vision is that companies don't necessarily get a competitive advantage simply by being first to market with a product or service.
Commercial success comes from being the best, not the first. Google wasn't the world's first internet search engine and Facebook wasn't the world's first social networking website. Xerox was quick off the mark when it came to making photocopiers, but speed didn't guarantee it a sustainable long-term advantage.
Scott Cook is one of the founders of Intuit, the $14 billion company that produces Quicken and QuickBooks software programs. Apparently, he jokes of his ''47th-mover advantage''. That's because when he launched his personal finance software there were 46 similar products already on the market.
A fortnight ago, BHP Billiton boss Kloppers called upon the federal Labor government to set a carbon price and act before an international agreement. He was doing so to ensure Australia maintains its ''competitiveness''. Julia Gillard credits Kloppers' speech as one of the reasons why she broke her election promise that ''there will be no carbon tax under the government I lead''.
Leaving aside the question of what happened if Australia sets a carbon price and an international agreement never eventuates, there's the issue of why it's assumed that acting first provides any benefit whatsoever. Certainly, some people have used moral arguments about Australia's responsibilities to the rest of the planet as the justification of pricing carbon when other countries are not. But Kloppers didn't base his claims on morality. He based his claims in the dispassionate language of the country's economic self interest.
To be fair to the BHP Billiton boss, he's not the only one falling into the first-mover trap. In the Treasury Department's briefing to the incoming Labor government that's now been made public, at the end of the discussion as to why market-based mechanisms to reduce carbon emissions should be adopted there's the statement: ''All of this serves to underscore the conclusion that the sooner an emissions trading scheme can be implemented the better. Too much time has already been wasted -- for which the Australian community will necessarily pay a big price.''
In simple terms, the reason there's no such thing as a first-mover advantage is because, second, third and fourth movers have more knowledge than the first mover. It's a principle that applies regardless of whether a company is selling toothpaste or an economy is managing the introduction of a carbon price. There's a multitude of ways to implement a price on carbon and it is naive to think that somehow Australia is going to fluke at its first attempt the optimal design of such a pricing scheme.
The ''at least something is better than nothing'' argument doesn't apply in this case because the cost of fixing a flawed system could be more expensive than introducing it in the first place.
Similarly, the claim that because Australia is such a carbon-intensive economy it should therefore be the first to introduce a carbon price because it will give businesses longer to adjust to using less carbon, doesn't acknowledge the fact that the way in which businesses reduce their carbon emissions is as important as the amount they reduce their emissions by.
If Australia implements a carbon tax, and the United States implements a cap and trade scheme, what happens then? What will have been the advantage of Australia going it alone on a carbon tax? The idea that Australia should impose a price on carbon emissions ahead of the rest of the world and that this will give us a competitive advantage is another manifestation of the myth of the first-mover advantage.
ADVERTISEMENT
No comments:
Post a Comment