For Dot-Coms, First Mover Disadvantage
The implications that the Global Health Exchange, the new Internet portal formed by a group of leading medical device firms, is, in some sense, now a market maker, underscores one of the clear conclusions that can be drawn from what has been a crazy year for e-health companies. Virtually everyone underestimated the power of the entrenched entities to, at once, defend their turf and develop their own responses to the Internet opportunity. B2B dot-coms burst on the scene arguing that the current hospital supply chain players had failed to do the job and that they would provide an alternative with new models for doing product procurement more efficiently--trading exchanges, for example, or on-line auctions or RFPs. But the dot-coms quickly faced a chicken-and-egg problem--no matter how ingenious their business model, customers wouldn't sign up without proof that there were suppliers on board and suppliers wouldn't join in without evidence that the site would have customers valued by both sides. This is the opening that the Global Exchange hopes to exploit, and ironically, while the dot-coms early on debated the importance of brand names and first mover advantage, it now seems clear that the ultimate advantages already belonged to those established players that the dot-coms first tried to challenge and later sought to team up with.
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In most industries, creating strong demand for products is the key to proprietary value--and the more demand, the greater the value. But in the case of both drug and Internet companies this past year, the very thing that should have created enormous value--the potential for extremely wide-scale adoption of their products--instead fostered push back when adoption threatened to become too widespread because it was too valuable for any one company to have on an exclusive basis. The tremendous importance that both pharmaceuticals and the Internet, for different reasons, have assumed in people's lives has turned what should be a proprietary asset into something closer to a semi-public utility.
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