Innovators That Are First Don’t Always Stay First

In the internet age, time and time again we have seen companies that are the first to market get run over by next generation competitors that do the business better. Creative destruction in capitalistic markets is amazing to watch.

Within social media, the first real player was My Space. My Space was superceded by Facebook. Now, Google+ has tried to take Facebook on. It’s way to early in the competition to know what will happen, but Facebook has had to step up its game and innovate it’s platform simply because Google+ is around. That’s good for all of us.

Sometimes innovative companies create new terrain. I think that is the case with Foursquare. However, I am not sure Foursquare will survive. What is Foursquare? When you go somewhere you virtually “check in”. You can link this with Facebook and then friends that are also around will know you are there and you can hook up. Merchants might offer incentives to check in, which come in the form of free stuff or deals.

I have been messing around with Foursquare for a while now. It’s more of a pain in the butt than advantage. To restate that in economic terms, the cost of taking the time and effort to check in everywhere is greater than the opportunity cost of doing nothing. There isn’t much bang for the buck to being on Foursquare.

If I really want to check in, all I have to do is use the Facebook “Check In” button anyway. Of course, I can’t get deals from merchants. But, Foursquare doesn’t have that many merchants signed up. That takes you back to the original thought, it’s more of a pain in the butt than anything else since I don’t derive any benefit from it.

A week ago, I was up on North Clark Street in Chicago. There is a place there called Molly’s Cupcakes. The cupcakes there are really really good. They are innovative too. Molly’s makes a peach cobbler cupcake. When I was checking out at the register, I noticed an iPad with a bunch of plastic cards there. I asked the store owner, “What’s this?”

Bellyflop“, she said.

“What’s Bellyflop?”, I said. Of course, my mind raced back to the boyhood bellyflops I knew when I jumped in the pool and tried to make a big splash. Trouble was, I was so skinny that I had to run around in the shower to get wet, so when I jumped in the pool, no one got wet.

Bellyflop is like Foursquare, but instead of being driven by the consumer, it’s driven by the merchant and the consumer gets immediate gratification for their actions. Merchants have incentive to sign up their customers, because Bellyflop can create lifelong customers.

What is interesting about a lot of these things is they turn customers into Pavlovian dogs. Reward them a few times and then a pattern establishes that they just follow. With the addition of Groupon Now, it will be great to watch this space. Will Foursquare change their business to compete?

Stores have always focused on their customers. But with this new technology, they will be able to tailor their business to meet more individual needs. It all ends up as being better for each of us in the end. Because this location based technology will enable us to get more of what we want, when we want it, and we might save a few bucks doing it.

tip of the hat Ace of Spades