Kristin Luck
When I work with early-stage companies, I often advise them on fundraising. During this process, potential investors typically focus on one crucial question: “What is your company's competitive moat?” In other words, they want to know your business's unique advantages to help it defend its market position and profitability against competitors in the long run.
The term “competitive moat” (popularized by Warren Buffett as an “economic moat”) refers to a business's ability to maintain competitive advantages to protect its long-term profits and market share from competing firms.
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. 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?
UNLOCK YOUR BUSINESS'S TRUE POTENTIAL
BY DISCOVERING YOUR UNIQUE "OWNABLE SPACE
What is an economic moat for service-based companies?
Let’s talk about service-based companies. 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 percent unique, but it does need to be a 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 make a big bold claim and defend it.
That said, the digital world defensibilities James Currier outlines can benefit service-based firms. Here’s a services-based twist to Currier’s tech-driven defensibility strategies:
Economies of scale
Consider developing syndicated products or services to attract more customers at a lower (or more obtainable) price point.
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 affinity or as I like to think about it, brand “love.”
Embedding
Can strategic partnerships or integrations create value for your business? As my friend Cindy Gallop says, “The future is about competitive collaboration where businesses 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’.”
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”?