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26. October 2017

How beginners become winners

First movers: Even the best ideas need some luck

First movers create or conquer new markets. But what if the time isn’t right for a new business idea? Or if the market becomes highly competitive very quickly? Some innovations are just victims of unfortunate timing.

A tale of two video systems

Once upon a time, people recorded TV-shows on video cassettes. Right, that was VHS. But nobody remembers Video 2000. In 1979, consumer electronics manufacturers Grundig and Philips introduced the video recording technology as a European answer to VHS. Video 2000 was even superior to VHS: a single cassette could record up to 16 hours of TV-programmes.

Alas, the Europeans couldn’t cash in. The first Video 2000 devices were too expensive and prone to glitches. And before the second, workable generation of Video 2000 machines could be shipped to the retailers, Japanese company JVC had awarded licences for the VHS system and suitable cassettes to other manufacturers. VHS became the leading video system around the globe, even though it was technically inferior. Video 2000 was quietly buried in 1986.

First movers, late bloomers

There are many examples of new technologies vanishing from the markets after having some initial success. Take e-cars. Little known fact: up until around 1910 electricity was widely used to power cars. Porsche’s first electric car was introduced in 1900, while in the US 60,000 e-cars were driving the streets at the beginning of the 20th century. But then the oil industry set up a nationwide distribution network for cheap fuel and started promoting the greater range of petrol cars – the downfall of the first e-cars.

In the 70s, manufacturers like Volkswagen tried to revive the electronic car, but the first e-Golf sold a grand total of 20 vehicles. Today, the electronic car is seen as the seminal growth sector in the car industry. But even an innovative company such as Tesla really is just a late bloomer instead of an early mover.

In the computer industry, a well-known casualty was first mover Konrad Zuse. For years, the digital pioneer bickered with the patent office, which did not deem Zuse’s first universal computer language worthy of a patent. Today such “experts” would elicit incredulous head-scratching. A whole bunch of tinkerers failed at constructing a simple zipper, until, in 1912, Gideon Sundbäck from Sweden secured a patent for a practicable model. Another late-comer scrounging off the work of others. And the teleprinter, once widely used, was ousted by the telefax, a Japanese invention. The fax machine simply was able to transmit exotic Asian names, the teleprinter wasn’t.

A solution for a non-problem?

In the world of finance, Kesh is throwing in the towel in November of 2017. A fin-tech failing as a first mover? Possibly. As always, the reasons of why a product fails are revealing. Kesh was a mobile payment service for small amounts of money, developed by the Willich-based Bank für Investments und Wertpapiere (biw). The idea was to turn the smartphone into a digital wallet. But the system was limited to the area of Willich and proved rather cumbersome because of its protracted registration procedures. After all, who would want to brandish their mobile phone about while paying for a loaf of bread when they’ve got the coins in their pockets? Was Kesh a solution for a non-problem? Or did simply not enough businesses participate?

Or maybe the whole system wasn’t economically viable because it focused on very small amounts? Was it launched too timidly and in a region too small to reach a critical mass of users? Or was it simply ahead of its time? The comparable system Kwitt (by the savings banks group Sparkasse), which is used to transfer small amounts of money, was able to acquire 260,000 customers – admittedly, the target group was much larger than the one in Willich.

The reasons for Kesh’s failure could be down to a matter of opinion, and other fin-techs couldn’t get a foot in the door with their services, either. But this should not deter any up-and-comers from trying. Rather, they should analyse their prospective markets more thoroughly. biw changed their name to FinTech Group Bank, which hints at a promising future. Up and at ‘em, first movers!

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