Friday, September 21, 2007

On being - and staying - different

If you learn one thing in business very quickly it is that sameness is your enemy and differentiation is your friend.

The more different your product or service is, the more you can charge for it (provided there is a market of course).

OK, so far so good. So you go ahead and invent the best-thing-since-the-real-thing and set up shop. And you find that there is a market, and that people start coming in and paying you money for it.

That's when the competition comes in and wants a piece of the action - and that's where the real test starts. For you might have spent years perfecting your product or service, but it is going to take your competition much less time to get there - since you have shown them the way.

So it's never really enough to have a product or a service which gives you an advantage. If you are not able to defend your advantage you don't have a business yet.

There are many ways of defense, but they all fall into two simple categories.

1. Run Like Hell:

If you follow this approach you keep innovating, keep moving ahead. By the time the competition catches up, you are well on your way to the next product, next service, or idea.

So basically you take advice from the Red Queen, who said: "Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!"

To do this you have to be clever.

2. Build a Fort:

In this strategy, you stay in the same place but build very high walls around your business so no one can get in.

There are many ways to build a fort, but often you either have to be very strong (to stop them) or very small and complex (so they don't bother, though this works less often as there will always be competitors who consider your size worth going after).

You can also build forts with patents, trademarks, a strategic location, a unique brand and many other ways - but the principle is the same: get somewhere first, and don't let others get in.

Of course the two are not mutually exclusive. Google works partly because they keep one step ahead of the competition in search technology, but partly also because they have built the kind of scale which can be taken on by very few competitors.

Apple is more of an innovator: by the time people caught on to the first wave of iPods, they had come out with the Nano. Before the prices came really down on flash-based players, they invested into multi-touch technology. So they Run Like Hell. But they have also built a Fort: their brand. The Apple brand has a cult following cultivated carefully and systematically over years, which keeps their customer base fiercely loyal.

Microsoft uses its size and market share to keep out the competition. But it has to innovate also, though it can afford to make a lot of mistake before its scores a winning innovation.

Run Like Hell, or Build a Fort - or those footsteps behind you will keep getting closer.

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