Strategic Competitive Advantage

Most of the pitch decks that I receive include a Boston Matrix of some kind. Typically the startup that is pitching places itself in the upper right corner (superstars), far away from all existing and future competitors.

BCG Matrix: what it is and how to use it - Real useful examples

As Hunter Walk said:

If Your Pitch Deck Has a Competitive 2Ɨ2, Iā€™m Going to Ask You This Question https://t.co/NZdbYhnQ6yĀ [new blog post]ā€” šŸ§‘šŸ»ā€šŸ’»ā˜•ļø (@hunterwalk)Ā May 25, 2020

Most of us equate startups with innovation. Sometimes the novelty lies in the product or service, sometimes on the business model itself (ask Mark Zuckenberg of TheFacebook fame).

I am particularly attracted to startups operating at the crossroads of radical ideas, i.e., ideas or businesses which are simultaneously being implemented in different industries or geographies. As I will explain below, there are many sources for achieving a lasting strategic competitive advantage. Being a first-mover is only one of them.

Strategic Advantage and Systems Thinking

Mike Ghaffary, GP at Canvas VC, discusses in the video below the concept of ‘strategic advantage’, i.e., what is your long term sustainable reason for succeeding in business.

Every startup needs a strategic advantage or a combination of them: it can be summarized with the phrase ‘what is your moat?’ (a.k.a. defensibility). You should be concerned if you have no strategic advantage since copycats and fast followers will soon put you out of business.

The classic analysis of a competitive market is Michael Porter’s five forces model. Have a look at the article How Competitive Forces Shape Strategy and save yourself the cost of an MBA.

Some types of strategic advantage include the following:

  • Marketplace with network effects – Mike published this post on how to evaluate strategic advantage in a marketplace.
  • Same-side network effect
  • Data Moat
  • First Mover / Brand
  • High switching costs
  • Proprietary Distribution
  • Regulatory

Some signs of competitive advantage:

  • ‘Liquidity’ / frequency of use / Average transaction size
  • Take rate / ‘rake’
  • Low risk of disintermediation

These are the steps that Amazon took to systematize their moats.

I strongly recommend watching the full video!

Mike Ghaffary, GP at Canvas VC

Any entrepreneur can build radical businesses that positively impact society

Peter Diamandis

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