Some might argue that firms deploying artificial intelligence early will gain a sustainable advantage over others in their industry and category. I tend to doubt that.
The issue is that some firms might have other advantages. They might be better managed in general; more adaptable; more agile. The point is that they might do most things better than competitors, including using new technology.
The management literature generally supports the idea that sustainable advantage is quite rare, and where it happens, might be explained by other advantages than the early deployment of a new technology.
In short, being first to deploy a significant technology is, by itself, not a reliable source of sustained competitive advantage.
Lieberman and Montgomery's First-Mover Advantages are foundational studies.
The time for competitors to enter a new product market has shrunk dramatically from 33 years early in the 20th century to 3.4 years later in the century and continues to shrink. So first-mover advantage exists, but most likely will be a fleeting advantage.
And early technology adoption by itself is not a determinant of sustained competitive advantage. Instead, it usually indicates there are other mechanisms at work.
Early movers only create enduring benefits when their timing advantage is simultaneously mobilized with network effects, aligned with competence-enhancing trajectories, sustained partner rents across the value network and continuous absorption of external knowledge, for example.
Almost by definition, new technologies that prove to have value will be accessible to all, over time (technology that enterprises can afford eventually are adapted for mid-market and finally small businesses or individuals.
For competitive advantage to be sustained over time, barriers to imitation must exist.
“The problem for Kmart and other wannabe Wal-Marts is what Lippman and Rumelt
refer to as causal ambiguity,” say the authors of The Analysis of Competitive Advantage.
“The more multidimensional a firm’s competitive advantages might be, and the more each dimension of competitive advantage is based on complex bundles of organizational capabilities rather than individual resources, the more difficult it is for a competitor to diagnose the determinants of success,” they state.
“The outcome of causal ambiguity is uncertain imitability: where there is ambiguity associated with
the causes of a competitor’s success, any attempt to imitate that strategy is subject to
uncertain success,” they add.
In other words, sustainable advantage might happen when competitors are uncertain about how a particular innovation adds value, in a mix of value drivers.
On the other hand, that is probably the outlier.
Contemporary research from Harvard Business School indicates that first-mover companies achieve sustainable competitive advantage in only 37 percent of new market categories, while fast followers demonstrate superior long-term profitability in 42 percent of markets studied.
Being a fast follower often results in long-term advantage, some studies have found.
Still, some studies suggest when sustainable advantage might be generated.
Network effects are a classic example. When a product or platform becomes more valuable as more people use it, early movers can lock in users before alternatives exist.
Proprietary technology plus early entry can offer sustainable advantages, as can switching costs and ecosystem lock-in.
Still, first movers often do not succeed. When a new technology destroys the value of an incumbent's existing capabilities or partner relationships, early deployment can be a liability, if fast followers are agile enough.
But the rule might well be that when new technologies are able to gain wide adoption, sustainable advantage cannot be maintained by a first mover.
The research suggests that durable advantage comes not from deploying a technology first, but from what a firm builds on top of that deployment:
network effects
switching costs
Without those, competitors do, as a general pattern, catch up, and often faster with each passing decade.
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