Markets are not meritocracies. The best product does not always win. The superior technology often loses to the adequate alternative that arrived with better timing, stronger distribution, or clearer narrative. Understanding why requires abandoning the comfortable fiction that markets reward excellence and embracing the harder reality: markets reward early cumulative advantage, network positioning, and the ability to shape perception.

There are four structural distortions that make competition systematically unfair: path dependence and lock-in, first-mover (dis)advantages that depend on hidden conditions, brand-based differentiation in commodity spaces, and network structure that amplifies inequality even when individual firms are performing similarly.

Path dependence means that history matters, often more than current merit. When network effects exist, when switching costs are high, or when customers coordinate around shared platforms, the product that achieves early adoption can lock in permanently even if alternatives are technically superior. Once enough customers adopt VHS instead of Betamax, or Windows instead of superior competing operating systems, the inferior standard becomes self-reinforcing. Future adopters join not because the technology is best but because that is where everyone else already is. The lock-in is not due to brilliance in execution; it is due to the architecture of network effects. By the time this becomes obvious, it is too late.

This is not random. Research on innovation diffusion on industrial networks shows that network structure (i.e., how firms are connected, who sits at the centre) dramatically shapes which innovations spread. Scale-free networks with hub structures, where some firms are disproportionately central, exhibit different diffusion properties than decentralised networks. In scale-free networks, innovations can spread with low threshold, but the same structure that accelerates diffusion of successful ideas also increases the likelihood of locking in suboptimal choices. Centralised networks with dominant hubs are faster but less intelligent; decentralised networks can be both fast and optimal.

First-mover advantage is widely cited but poorly understood. The research literature distinguishes sharply between first-mover advantages (which are real but conditional) and first-mover disadvantages (which are equally real). Early entry can confer advantage through technological leadership, cost curves that fall with cumulative volume, or pre-emption of key assets. Yet early entry can also be a liability: pioneers often encounter technological and market uncertainties that cause them to acquire the wrong resources, the wrong partnerships, or reputational damage that later entrants avoid. The evidence across industries shows that entry timing is endogenous to firm capabilities; firms with certain assets may be optimal pioneers whilst others should follow. Being first is only advantageous if you have the specific capabilities to exploit first-mover mechanisms. Absent those, late entry with superior execution often outperforms early entry with weak execution.

More fundamentally, first-mover advantage itself depends on conditions largely outside any firm's control: whether the technology path proves correct, whether market demand emerges when you predicted, whether competitors follow or ignore your market. These are luck factors. Research documents repeatedly that luck plays a substantial role in whether first-mover status generates advantage or disadvantage. Firms without control over these external conditions should be sceptical of claims that being first will save a weak value proposition or that building the best product in isolation will win without attention to timing and distribution.

Commodity-like markets illustrate another distortion: when products are functionally equivalent, perception becomes the product. A tonne of steel is a tonne of steel, yet firms successfully command premiums by shaping how customers perceive reliability, service reliability, financing terms, and whether the supplier will stand behind failures. The brand is not a logo; it is an operational promise socialised through narrative. When technical differentiation is invisible or absent, the ability to construct credible narrative about what happens after purchase becomes the primary lever. This shifts competition away from intrinsic product merit and toward the firm's ability to manage perception and deliver on reputation.

Network centrality creates a final distortion: inequality emerges not from differential ability but from network position. Research on innovation-facilitating networks finds that centralised networks that boost overall innovation also systematically increase inequality. Central firms capture outsized rewards relative to similarly capable peers, simply because they are connected to more partners and therefore have access to more opportunities, information, and influence. This is not inevitable. Decentralised networks can achieve equivalent performance without the inequality. But many industries naturally evolve toward hub-and-spoke structures where central firms accumulate advantage not from superior talent but from structural position. By the time this is visible, the centre has accrued advantages (relationship capital, information advantage, alliance obligations) that entrench the position.

What does honest strategy look like under these conditions? First, acknowledge that markets are not fair. This is not an excuse to behave unethically; it is a precondition for strategy that does not waste resources pursuing illusions. Second, design to stack the structural odds in your favour: compete for early distribution and network position, not just product quality. Third, treat timing as a design variable: choose whether to pioneer, fast follow, or enter late based on your actual capabilities and the market context, not on ego or first-mover mythology. Fourth, build brand and narrative as essential infrastructure, not as decoration after the product is finished. Fifth, invest in visibility enough to seed distribution and unlock word-of-mouth, without allowing marketing to hide weak product-market fit.

Excellence in product remains essential. But excellence alone is not sufficient. Strategy under unfair conditions means excellence plus timing, plus network position, plus narrative, plus distribution. The products that win are usually quite good. But so were many that lost. The difference between winner and loser often hinges on factors that have little to do with merit.

This realism is uncomfortable. Many prefer to believe that markets reward excellence because it offers the illusion of control. In fact, acknowledging these distortions is the first step toward strategy that actually works: one that plays the game as it is, not as theory says it should be.