> there are plenty of examples of companies creating products in saturated markets where they were not the first mover
There is an "exceptions" section closer to the end of the post that discuss this, though it probably should have been longer.
The biggest issue with exceptions like this is that first-time founders often jump into a saturated market and think "we can do better -- look at all the counterexamples", but they end up losing the overwhelming majority of the time. You can jump into a saturated market, but you need a hypothesis as to why you're going to win (a distribution edge that existing competitors don't have, a new trend that existing competitors can't capitalize on, etc.) Especially in the latter case, one could make an argument that you will have discovered a new trend/market, though at that point it's a matter of definitions.
"The biggest issue with exceptions like this is that first-time founders often jump into a saturated market and think "we can do better -- look at all the counterexamples", but they end up losing the overwhelming majority of the time."
I'd be curious to find data to back up that assertion - I've personally seen way more people/companies fail trying to skate to where the puck is going to be vs. just going after businesses where there are already existing solutions. But again, this is anecdotal data.
The best example I have of this is Google. Search was done and owned by a handful of players - they innovated and won. But to your point about definitions - did they win on that, or win on creating Adwords (which they were also not the first mover on)?
Perhaps it comes down to this: entering a market where there are low switching costs means that you can enter late with a significantly better product - but it has to be 4x better (that's my rule). Meaning the product has to be 4x better than the existing solution.
If, however, you're entering a market with high switching costs, then the benefit probably has to be great than 4x - maybe 8x. As an example - look at all the people trying to get people to switch off of Salesforce.com. I don't know anyone that likes this product - but no one can switch because the costs are too high across the board - organizationally, data-wise, software - while the resulting CRM might be marginally better. That means that startups going after that can get traction with people who don't have a CRM, but not with existing CRM customers - and thus bang their head against the wall/fail.
There is an "exceptions" section closer to the end of the post that discuss this, though it probably should have been longer.
The biggest issue with exceptions like this is that first-time founders often jump into a saturated market and think "we can do better -- look at all the counterexamples", but they end up losing the overwhelming majority of the time. You can jump into a saturated market, but you need a hypothesis as to why you're going to win (a distribution edge that existing competitors don't have, a new trend that existing competitors can't capitalize on, etc.) Especially in the latter case, one could make an argument that you will have discovered a new trend/market, though at that point it's a matter of definitions.