For Dot-Coms, First Mover Disadvantage

Executive Summary

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.