I read a really interesting Jill Konrath article this morning that made me think about what we are really trying to do in startups, in marketing and sales. That is how to find competitive advantage.
Her key point was
our job, as sellers, is to make things unequal.
In much of the modern world we are focused on promoting equality and fairness. Earlier this week a Nobel Laureate resigned after he complained about female scientists, and in vast areas of our personal and social lives we expect people to be treated fairly and equally regardless of their sex, colour, race or almost anything else.
That’s not the way it should be in business. Ideally you want to create an environment where it is difficult for the competition to flourish, where customers automatically think of you and competitors have to pay an additional cost to get or stay in the game.
A lot of traditional marketing has focused on this through brand building but I think it is more than that. Take for example Uber.
Uber has pots of money in the bank, lots of actual and potential competitors and a ferociously combative approach to regulators and legal systems. My view is that they see drivers of their cars as an intermediate step that will last for a few more years until cars become self driving.
If that’s right then by actively poisoning the well in lots of cities around the world they are creating a huge barrier to entry for other companies to scale. Once they have self driving cars they can give up all the legal battles freely and comply – because their cost of operations will be a fraction of traditional taxi companies.
Creating Competitive Advantage
So this comes back to Porter’s Five Forces and the question that must be at the forefront of every entrepreneur’s mind –
“How do I find a competitive advantage?”
- Yes, you can make a business model.
- You can get customers.
- Yes, you can get traction.
But how do you have a market share significantly large than any competitor? How do you ensure that you have a conversion rate or margin that is significantly higher? How do you find competitive advantage as a startup and keep it?
It’s really hard to do which is why it’s so much fun to watch Uber’s billion dollar decade long bet play out. It may or may not work, but if it does it will have a similar position to Standard Oil, Ford or Microsoft in their glory days – at leasts for a while.
How To Find Competitive Advantage?
The killer question is how do we do this for a startup?
Most of the time you don’t and you can’t. There are too many me too, copycat products that aren’t original or disruptive. Where you can it is mainly a focus of playing and playing with the business model. Some entrepreneurs I know find a business model that works and then using the business model canvas and other tools they iterate. They mentally look at hundreds of variations.
What happens if none of these segments are viable? Can we use an entirely different channel? Can we use a monetisation strategy from another industry that will work in ours but which competitors can’t adopt for fear of cannibalizing existing revenue?
Iteration, scenario building is one way of doing it. We could call it the ‘scientific’ approach.
Beer, Drugs and Zen States aka Black Swan Hunting
The other approach to finding competitive advantage is the ‘mystical’ one. I get many of my best insights swimming laps, whilst dreaming, doing cross country runs or singing in the showers. Doing business modelling drunk or stoned can really open up possibilities. The ancient Babylonians tested decisions drunk and sober to see that they worked.
Of course you get a lot of rubbish non-viable ideas – but you get similar failure rates doing it scientifically. The difference, is that when you take a scientific approach you have a set of tolerances or parameters that bound potentially good options and limit the possibilities of black swans
When you take a mystical approach your inhibitions are relaxed and you go down paths that rationally seem to have a low payoff. Most have no payoff, but you only need one to work to give you an unfair advantage. Then you are heading out looking for black swans
In reality you do both, but you need to be constantly asking the question: “Where can I find an advantage? How can can I use it to make the world unequal?” This needs to be a core part of your lifestyle for years.
What you have now though is good enough. As Steve Blank says you need to get out the door. Get the business working, make sales, grow. You can do all that without having a great competitive advantage. The real massive and long term growth that comes from dominating a sector, rather than riding an economic upswell, comes back to having this question haunt you. If it doesn’t you are relying on luck and she is a fickle friend.
If you are still looking for your competitive advantage contact me for a free consultation