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My biz partner @shiyankoh writes a weekly newsletter to our @HustleFundVC founders. I thought this wkend's edition on strategy & building moats was exceptional & wanted to share excerpts...
1) "Strategy" is an overused term - what is it?
My biz partner @shiyankoh writes a weekly newsletter to our @HustleFundVC founders. I thought this wkend's edition on strategy & building moats was exceptional & wanted to share excerpts...
1) "Strategy" is an overused term - what is it?
2) @shiyankoh draws from the podcast "Invest Like the Best" with @patrick_oshag - episode with Hamilton Helmer: http://investorfieldguide.com/helmer/
Strategy is about creating a path to creating persistent differential returns to a business.
Strategy is about creating a path to creating persistent differential returns to a business.
3) Helmer says in the podcast that a good strategy must have 2 things: a BENEFIT and a BARRIER.
most entrepreneurs think about benefits but ignore barriers.
most entrepreneurs think about benefits but ignore barriers.
4) A benefit: materially augments your business's cash flows by enabling you to increase prices, reduce costs, and/or reduce investment needs
A barrier: prevents existing & potential competitors from arbitraging away the benefit
When you are starting, there are no barriers BUT
A barrier: prevents existing & potential competitors from arbitraging away the benefit
When you are starting, there are no barriers BUT
5) It is important to think about how you will establish barriers in addition to benefits.
This is esp important TODAY where we live in a global economy and ppl can fast-follow and do exactly what you do.
This is esp important TODAY where we live in a global economy and ppl can fast-follow and do exactly what you do.
6) E-commerce / DTC companies see this a lot.
For every category leader, there are 5 others not far behind - incl Amazon who has no qualms figuring out which products sell well and then making products themselves.
But even beyond DTC, SaaS cos, et al - they all have clones
For every category leader, there are 5 others not far behind - incl Amazon who has no qualms figuring out which products sell well and then making products themselves.
But even beyond DTC, SaaS cos, et al - they all have clones
7) Ok so how do you actually start to build a moat over time?
There are the common ways that most ppl think of: build brand, economies of scale, establishing switching costs). Let's talk about a couple of lesser discussed ones.
There are the common ways that most ppl think of: build brand, economies of scale, establishing switching costs). Let's talk about a couple of lesser discussed ones.
8) An interesting one - Counter positioning: use your competitor's strength as a weakness.
E.g. Blockbuster made $$ on late fees. Netflix removed fees altogether.
E.g. Adobe did this to themselves; don't pay $1k for our design software; now pay monthly subscription
E.g. Blockbuster made $$ on late fees. Netflix removed fees altogether.
E.g. Adobe did this to themselves; don't pay $1k for our design software; now pay monthly subscription
9) Every strength is a weakness. Evaluate your company's own weaknesses (be honest w/ yourself) as well as your competitors' AND alternatives. And figure out how to Aikido the heck out of it.
10) Also interesting - Process power.
Benefit - Can improve product attributes &/or lower costs due to process improvements embedded within the co
Barrier - These process advances are tough to copy, & can only be achieved over a long period of sustained evolutionary advance
Benefit - Can improve product attributes &/or lower costs due to process improvements embedded within the co
Barrier - These process advances are tough to copy, & can only be achieved over a long period of sustained evolutionary advance
11) The immediate example that comes to mind here is Amazon.
They can lower the cost of products due to super efficient supply chains. They use data science to know what their customers want & deliver even more efficiently.
They can lower the cost of products due to super efficient supply chains. They use data science to know what their customers want & deliver even more efficiently.
12) But impt to note that many other companies - even ones w/ out physical logistics - build Process power & most ppl don't realize it.
Especially in customer acquisition and marketing.
Especially in customer acquisition and marketing.
13) For ex: let's take SEO. Many new entrepreneurs think the way to do SEO is to figure out what keywords to rank for. Then maybe write some articles. Maybe do some outreach to build backlinks. And there ya go.
An SEO team w/ exceptional Process power can scale this w/ systems
An SEO team w/ exceptional Process power can scale this w/ systems
14) That team would have a group doing keyword research in a repeatable scaled way. & would have a writing team who writes content en masse. & would have a backlinks team to build partnerships en masse. & would track the detailed costs & see if profitable. Rinse & repeat.
15) All customer acq teams should feel like a repeatable machine where you are getting better and better. (ie. increasing revenue / decreasing costs to become more and more efficient and scaled)
