Real Unfair Competitive Advantage

What if someone copies your brilliant business idea?

About twenty people at Answers OnStartups asked this question in one form or another:

When I meet an angel investor, he may ask: “What if a big company copies your idea and develops the same site as you do after your site sees the world?”



How can I answer this question?

No, the question sounds different: what are you doing now, knowing that a big company will copy your idea?



No, wait, actually the question is: what are you going to do when another clear, daring startup copies it, and receives ten million funding and will be marked three times on Habré ( Per .: in the original TechCrunch, but as the reality shows , Habraeffekt is cooler )

')

No, wait, I apologize, in reality the question is: what will you do when there are four completely free open source competitors?



But wait, I forgot, the following question is really correct: what happens when your right hand is washed off with your code, plan, all marketing data and customer base, moves to Bolivia, and starts selling your project around the world for ten times the price?



Good news: these questions have answers!



The bad news: almost no one with whom I speak has the right answers, but they think they have. And this is fatal, because it means that they do not work in advance to prevent critical situations. This means that when one of the above scenarios is implemented, it will be too late.

The first step is to recognize that the problem exists.

Over the last week I have detailed the most common misconceptions regarding competitive advantage, so go read it if you have not done so already.



To summarize: everything that can be copied will be copied, including features, marketing policies and pricing. Everything that you read on popular blogs can also be read by any other. You do not have “advantages” simply because your eyes are burning, you are a workaholic, or a specialist in lean.



A real competitive advantage is something that cannot be copied and cannot be bought.



Like what?

Insider information

It is said that the only way to constantly make money on Wall Street is to have insider information. Unfortunately, this is not a joke, although it is illegal (and people sometimes go to jail for it), those in the subject will tell you that this is normal.





Fortunately, using the knowledge of the market and its problems is a completely unfair advantage for a startup.



Here is an example of how this advantage manifests itself in action. Adriana worked as a psychiatrist for 10 years, she understands everything from A to Z in this business. At the moment of a lull at work, she had the lucky chance to completely change the type of activity, and eventually she became the team leader of the software development team (it turns out that the ability to feel people, to be a thinking person and an advisor, and not to expert in debugging C ++ code).



Now Adriana realizes that traditional software in psychiatric practice is just garbage; she learned at the same time both the pitfalls of the sphere, and the shortcomings of the existing programs in their own skin. But now she has the vision and the ability to create her own software using profitable modern trends (for example, web applications instead of cumbersome application programs) and new versions of HIPPA (which allows web applications to store medical records as patient records)



Adriana takes a unique position: an expert in the field, the ability to transform into his client, and also the ability to manage the development team. Even if someone sees Adriana's product after his appearance, it’s almost impossible to find a person — or even assemble a team — who would have more unique knowledge and skills. At best, they will copy. Of course, by that time, Adriana will release the next version.

Persistent, uncompromising obsession with the main feature

A popular comment to the previous post was that “Unique Opportunity” can be a competitive advantage in some cases. Some examples where some feature is the main advantage of companies:

• Apple sacrifices everything in the name of design. Their products have inflated prices (magically decreasing twice a year after entering the market), bugs (how many iOS hacks were there?), And every experience with their technical support, which I had the good fortune to receive, was terrible, but Their things look cool and enjoyable to use! (I’m picking it up on Air and I’m holding an iPhone in my pocket, so please, Yabloko’s, don't write me letters)
• Google’s search algorithm was simply better than others, and so they riveted their attention and were able to monetize. Of course, Bing and Yahoo are good now , but the supremacy lasted long enough.
• Photodex is a small company that you have never heard of, in which I worked in the nineties in Austin. We made an image viewer with thumbnails, so you didn't need to open each file in order to understand what it was. (in the nineties, before (!), as it was built into all operating systems by default). Our advantage was speed. Not the best, not the most stable, did not read all possible formats, did not have most of the possibilities - just the fastest. For many users of that product, speed decides; Photodex now earns tens of millions of dollars a year, and the speed to this day is the only thing for which they go for everything.

However, it is not enough for the feature to be simply unique ( like my mini-browser ), because it is still easy to duplicate.



Moreover, most of the innovations that we have demonstrated in Smart Bear in the field of co-existence have already been copied to both open-source and paid competitors.



To a large extent, this requires devotion to the Main Fiche, in spite of everything that is a) difficult, and b) you must not give up in any way.



Google has spent hundreds of millions of dollars on its search algorithm, which is the company's sole and biggest focus even today, a decade after they decided to make it their main feature. They do not agree to lose to competitors or evil hackers, whatever the cost.



37signals can produce simple - even banal - software, and earn three million customers, because they will not give up their philosophy of simplicity, transparency, and owning their own company, and this is what millions of people respect and support them for. Competitors can also create banal web applications (as Joel Spolsky likes to say, “their software is just a set of text fields”), but without persistent obsession these will be products without Fitch.



To remain unavailable for copying, your Home Feature must be not only central to your existence, but also not easy to achieve. Google’s algorithm, instead of with software and hardware for its implementation, searching for trillions of sites in 0.2 seconds is difficult to reproduce; hundreds (thousands?) of really smart people at Microsoft and Yahoo have been working for years to catch up. The 37signals communications platform — a blog with 131,000 readers and the best-selling Rework is almost impossible to build, even with a twenty-four-hour army of enthusiastic authors.



“It’s hard to do the same” is still a working advantage, especially if you give him the main energy.



PS If more details - here are detailed examples of how this mental installation also customizes your sales.

Personal authority

Chris Brogan earns $ 22,000 in one day of consultation in his field (social media marketing), where all the information you need is already available online and free. Joel Spolsky makes millions of dollars on a bug tracker in an area with hundreds of competitors and a little novelty. My company Smart Bear sells the most expensive tool among similar ones. How do we deserve this solid authority, and how can you earn this overwhelming advantage?



I am a great example of someone who was not an authority on anything , but raised his authority to such a mark that now my company (Smart Bear) is unattainable as a leader in terms of revenue and ideas in the field of automated code review (peer code review) .



Not only was I not only not an expert on a coding rule before creating a tool for a coding tool, I was not even an expert in the process of creating software at all! I did not give lectures, I did not have a blog, I did not keep a column in Dr. Dobbs’s journal, and, what is most interesting of all, I didn’t even know what a “cake” means — and this made the company successful .



Unfortunately, all this crap about “credibility” takes years of costly effort , and even then success turns out to be probably just luck or anything else, so is it worth it? Yes, it is, precisely because it takes years of effort and a little luck.



Authority can not be bought. You can get money from venture investors and “have credibility” throughout the year. A large company cannot simply decide that they want to be recognized as leaders in their field. Even a group of super miniature geeks cannot automatically become a group of authorities, because it is not a question of how well you write code.



But how is authority credited to revenue? Here is one small example:

I speak on the topic of automated coding at conferences . My competitors pay thousands of dollars for a premise, then spend thousands on advertising to the participants, asking them to come to this premises, then sell the product to the premises to disinterested, passing by, who was also bombed by other conscripts and confused by the general confusion.



At the same time, since I am known as an authority on coding and software development, I speak for a whole hour for an enthusiastic, focused group of a hundred people who are interested in the topic of coding. After the speech, usually 5-20 people want to talk face to face. Some come directly to the premises to receive a demo version, I give a private demo of many products, being on the sofas in the lobby. And it’s not unusual to earn $ 10,000- $ 50,000 on product sales to people who saw me at that performance over the next three months.

And this is just one example! Now add this: what effect does a blog that tens of thousands of people read? What effect on sales will be from my writing a book about the modern influence of the cake ?



Without a doubt, credibility is expensive in monetary terms and requires a lot of time. But it is also a stunning and incomparable competitive advantage.



(PS I hope that the authority that I slowly earn on this blog will help during the launch of my next startup. Of course, this is not why I keep a blog, but, of course, I use it to my advantage at the right moment!)



(PPS I apologize for the frank abuse of the word “authority”, given that I criticized everyone who does this .)

Dream Team

The world of startups is full of famous killer teams: Gates and Allen, Steve and Steve, Page and Brin, Fried and DHH.



In each case, the founders were super-smart, had complementary skills, worked well together (or well long enough to reach important points on the road to success), and how the team presented a unique, powerful and (in retrospect) unstoppable force.



Of course, it is easy to see, looking back , and a retrospective is a terrible teacher , but this principle can work for any startup, especially when your goals are more modest than becoming a new Google.



Take the success of ITWatchDogs , the company I helped create and eventually sell (before Smart Bear). The components of our Dream Team were obvious from the start:

• A variety of skills and abilities. One had experience in startups / business / sales (Jerry), the other was a reputable software developer (I), the third was a confident hardware specialist (Michael).
• Shared vision. We agreed what product to be and what the company's ultimate goal was to sell it.
• Insider knowledge. Jerry launched a successful startup in the same field, I had a lot of experience with languages ​​and software tools for embedded hardware, and Michael had years of experience in creating low-cost circuits and processors.

Of course, the Dream Team does not mean guaranteed success, but it significantly reduces the risks of a startup, and, moreover, complicates copying for competitors.



This is especially true in cases where someone in a team is already successful in their field, for example, has a huge successful blog or a big successful startup, or is fuckingly attractive with something else. Since there are competitive advantages that can be bought or are constantly being created, having such a person on the team is definitely a killer advantage.



PS This is the main competitive advantage of a startup that I am working on (and will soon be announcing), so soon you will see another example of this theory and that is much better! - you and I will be together to witness how in the coming months this will become (or not) a killer advantage (Yes, of course , I will tell you in detail).

Celebrity (Correct) Review

KISSMetrics is the third company of Hiten Shah. At first glance, this is another company "marketing metrics." It is a close, mature market with hundreds of competitors in any variations of large / small, expensive / medium / cheap / free, and product / service / hybrid.



But Hiten has something that none of those competitors have: investors and mentors who are celebrities in the market where he is heading. Guys such as Dave McClure, Sean Ellis , and Eric Ries, all of whom not only help hands-free during a call, but also actively promote KISSMetrics on their blogs, Twitter, and when appearing in public.



How much advertising will competitors need to surpass the endorsement and support that are on Hitan's side? Even if a competitor would also like to receive a positive review of a celebrity, alas, these guys are already busy , and in any field there is always only a limited number of well-known and respected authoritative people.



Many competitors have more options than KISSMetrics. And I can already see how sales are going ...

The buyer concludes: “Gyyy, it would be great to have all these features,” and Khiten replies: “Actually, no, because Dave, Sean and Eric all say that these features really strain and give nothing in the end. Our features are the ones that are really needed, which is evidently confirmed by these twenty companies whose revenue has grown. ”

Only at the expense of these advisers, Khiten will receive hundreds (if not thousands) of buyers. You cannot buy such a starting advantage even for millions of dollars, because these are not just impersonal leads (who saw KISSMetrics on the banner), these are people who trust Hitan because they associate it with other people whom they already trust.



PS If you attract money, investors like to see in the co-founders or even simply in the advisers of the one who was successful before. In a venture financing game, there are many more lemming habits than most can imagine.

Existing customers

... or as Frank Rizzo says: Hang your ears, assholes!



Everyone you have ever sold something to (or those who took the demo version but disappeared ) owns the most valuable market research you can imagine, and this is the very thing that the new competitor has absolutely will not be.



This is a kind of cheating, because everyone says “I’m listening to my customers”, which today means just another crap like “we are obsessed with the idea”, because in fact the truth is that if you really learn from your customers and never stop moving Forward, in creation, in innovation and in training, then all this together puts you ahead of most companies around the world.



As the company becomes successful, it enhances its momentum, which means that it moves in the same direction with the same philosophy. Like a physical impulse, the company's impulse vector becomes harder to change. This is logical, for example, in Smart Bear we have 35,000 users, so drastically changing the interface or the typical process will mean too much retraining, even if the result will be better in the end.



Even "cool, flexible" companies like 37signals are trapped. They were so transparent and confident in their “do less” philosophy that they could not enter markets where “less” is not just “less”. For example, with more than one sales in a traditional sales organization, it’s impossible to use Highrise - guys with a lot of signals believe that reports on supply systems, geographic areas and embedded campaign management are unnecessary complications, but in fact this Highrise is unnecessary.



Of course, the world is changing , and in particular, your customers are changing. This usually frees up space for the next competitor, but if you are already entrenched, you can strengthen your current position, insider knowledge and revenue stream for as long as you want.



And so, you have more money, you are better known, you have real happy customers who help you work a word of mouth for you, you have employees to create a new one, and you have more experience with what clients and what they need, that is, it means that you should have the best insight possible.



And each new competitor can kill you with just one of the killer advantages. If you do not use them, what stupidity is that?



Zoho explained with this argument why they are not very worried that Microsoft has become their direct competitor today:

Companies are usually not killed by competition - they usually find an inventive way to take their own bills with them. Office 2010 will be the end for Zoho, if we stop at innovations, stop being nimble and flexible in our business model. Again, if we stop doing all this, Zoho will die anyway , no Office 2010 will be needed for work.

37signals is trapped in a philosophy trap into which they have driven themselves, but you don’t have to do it.

Begit and win

Imitation must be the most sincere form of flattery, but it infuriates when someone does it against you.



Of course, you can fight this on the market, but you need something that cannot be copied, something that they can never beat you up, so grab it by the tail and don't look back.



Do not be discouraged if you do not yet have an unfair competitive advantage .. I, moreover, did not have it when I founded Smart Bear! But I worked in the right direction, and in the end I deserved them.