Defensibility... How to Determine Your "Competitive Moat"

Posted by Kristin Luck on 8/4/18 8:30 AM
Kristin Luck
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Defensibility... How to Determine Your "Competitive Moat"

When I work with early-stage firms, I’m often advising on fundraising where potential investors focus on one key question... "What is your competitive moat?"

The term “competitive moat” (popularized by Warren Buffett as an “economic moat”), refers to a business' ability to maintain competitive advantages in order to protect its long-term profits and market share from competing firms. 

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For founders and investors, defensibility creates the most value.

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Competitive advantage can be relatively easy to define if you’re an early stage technology driven firm, as it’s generally core to platform development. In fact, if you’re an early stage tech-driven firm currently in the process of determining your “competitive moat,” this short article from James Currier on Tech Crunch can guide you through the four key defensibilities Founders in the digital world need to focus on.

But what if you’re not a tech firm? Or a start-up? How do you differentiate service-based offerings, particularly in a vertical where there are a lot of similar players?

I advise the service-based firms I work with to determine “ownable space”. This space doesn’t need to be 100% unique, but it does need to be service, solution, position or approach that you can effectively “own” and put a stake in the ground. It should be something that your competitors can’t easily claim. Case in point, “ownable” space does not include things like, “we do high-quality work” or “our team is exceptional” – anyone can “own” these claims. Dig deeper. This can be an uncomfortable exercise for many service-based firms as it involves having some frank internal conversations about what truly makes you special and different. Then making a big bold claim and defending it.

That said, the digital world defensibilities Currier outlines can still benefit service-based firms. Here’s a services-based twist to Currier’s tech-driven defensibility strategies:

  1. Economies of scale 
    Consider developing syndicated products or services to attract more customers at a lower price point.

  2. Brand 
    A thought leadership based content marketing strategy can help you stand out from your competitive set. Think about strategies you can implement to drive brand “love”.

  3. Embedding 
    Can strategic partnerships or integrations create value for your business? As my friend Cindy Gallop says, “The future is about competitive collaboration where business’ share solutions to help grow and build overall markets, while putting the onus on each brand and business to identify its own inner values and philosophies that make it uniquely competitive, and therefore able to thrive in an environment where ‘a rising tide lifts all boats’.”

  4. Network effects 
    Think viral marketing practices... remember that “people do what other people do” so make sure you’re using client testimonials and case studies to your benefit.

So…what’s your “competitive moat”?


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