COMPETITIVE ADVANTAGE
8 Unfair Advantages While Starting Up
Something that cannot be easily bought or copied by a competitor
What is an unfair advantage?
Everyone claims they can copy Facebook, Twitter, or Netflix over a weekend project, but somehow no one has. That’s because Netflix or other big giant understand their customers, markets, and company operations in ways other people don’t. Gaining these insights specific to the industry could take years, so if you have insights other people don’t have, that’s a huge unfair advantage.
That's why unfair advantage means something that cannot be easily bought or copied by a competitor. It is also called competitive advantage sometimes.
Unfair advantage is the answer to VCs most popular questions—What if a big company copies your awesome business idea? What are you doing now to prevent it from copying? How are you going to compete with totally free, open-source competitors?
If you deeply understand your unfair advantage then you can easily tackle the above questions. That's why it becomes certainly important for a startup’s success, along with its business model and teamwork.
Let’s start with the best known of all:
1. First Mover
Have a vision that no one else sees as of now? Then you are early to space of new creation.
It's hard to find totally new market in today’s era, but you can definitely combine two different niches to create new opportunities. If you really find something unique, don’t waste time and validate your idea with Minimal Viable Product (MVP). (MVP is a concept from Lean Startup defined as a product that has only the core features that make the product works.)
But there are some disadvantages too — Not only you have to build a great product, but you also have to build a great market for your product.
Examples-
Kindle (ebook selling), eBay (online auction), Coca-Cola
2. Industry Experience
It is unique insights based on in-depth industry exposure. You can have leverage based on your skills or unique capabilities—like building products with quick turnarounds.
You can build a great product if you have relevant industry experience from your own professional experiences. It's a plus point if you have also an understanding of dealing with customers at the ground level.
Everybody can gain knowledge about the particular domain as information is free on the internet but for expertise, you have to perform trial and error. No one can transfer their expertise to another person because it is something that has to be earned. Expertise is self-taught learnings come from experience or mentors.
Examples-
Bill Gates, Steve Jobs, and Mark Zuckerberg
3. Location
There is a famous saying “that we are the average of the five people we spend the most time with” which is kinda true for startup space. If you're from Cambridge, Berlin, Stanford then definitely you have an unfair advantage over others because people there have a growth mindset.
Another advantage is you can easily hire great talent from there. A well-connected startup in the silicon valley will likely grow faster than an unconnected startup in Egypt.
Another point of view for location in terms of advantages is the easy availability of raw materials, low operational costs, low marketing cost, and low taxes the business owner has to pay.
Examples-
Silicon Valley, Bangalore(India), Berlin(Germany)
4. Loyal Team
Everybody wants to hire the best talent, but the fact is the world has a very limited supply of great people. A great team doesn’t guarantee success but it increases the probability of success exponentially and furthermore is hard for competition to copy. But what matters more than great talent is team members should be more responsible towards their end goals.
How can you form a great team? — There should be diversification in skillsets because if you assign a software developer to do sales then it would be futile. The second thing is team members should have a common vision and passionate about building products.
If one of your team members has insider knowledge of the same domain that you're working in or either someone has past founder experience then it's a plus point.
Examples-
Gates & Allen, Steve & Steve, Page & Brin, Fried & DHH
5. Network
I can't emphasize how crucial is networking for your startup’s early growth. Access to a good network can give you leads, hiring, referrals, partnerships, or maybe initial funding. It is the least expensive and yet most powerful way for growth.
Fun fact- People are 4 times more likely to buy a product when it is referred to them by friend.
That's how a significant percentage of your sales can come from your connections and their referrals. Don't underestimate the power of the network effect or simply word of mouth.
Sometimes you also get negative reviews from your network but you don't have to dishearten by this and try to implement suggestions in a quicker way to validate fast.
How you can do Networking? — by attending conferences, local meetups, by joining relevant groups and forums on the internet, by writing blog people loves to read, podcasting, and by vlogging your work life.
Examples-
Slack, Uber
6. Brand
The brand is building a tribe for your customers which makes your customer’s new identity. The only reason someone will associate or not associate with your brand is because of how it affects their perceived status. Brand helps people to looks more wealthy, stylish, or happier.
Branding is a major of two types — one is personal branding and the second is the company’s name branding. We all know how big giant use their brand name to sell high tickets products.
It takes years to create a reputed brand as you constantly need to satisfy customer expectations and upgrade yourself to stay ahead of the competition.
A strong customer-centric brand not only can attract loyal customers but also genius talented employees to work at their dream company like—Google for AI/ML engineers or SpaceX for aerospace engineers.
Examples-
Kylie Cosmetics by Kylie Jenner (personal branding), apple (company branding)
7. Existing Customers
If you have already great engaging customers then you can experiment with the change to the user interface or typical workflow for a better user experience.
If users don't like changes then you always have the option to pull back changes in the newer versions but this gives you an extra edge over new players who are just copying you and can’t experiment on their own in starting.
One more advantage of a large customer base is you don't always have to brainstorm new ideas for innovation, sometime you can actually listen to customers demanding new features.
Example-
Zoho, Salesforce
8. Existing Cash Flow
If you have more cash flow than competitors, then that's a huge unfair advantage. Cash flow is like petrol in the car where the car is your business, therefore it doesn't matter how awesome your idea is e.g Ferrari or Mustang if you don't have money to run it.
The most important element of cash flow is to minimize your expenses and raise funds to scale your business.
How you can start if you don't have enough funds? — Bootstrapping, It is building a company from the ground up with nothing but personal savings, and the cash coming in from the first sales. You can also do side-projects to ensure you have sufficient cash flow.
Examples-
Zoopla, whitehat (parent support), WhatsApp(brian acton)
Final Thoughts
Unfair advantages don’t last forever as “Only the paranoid survive”. It just makes it hard for competitors to enter but it can't stop them.
If you think you can have one philosophy forever for your product then I think any plan is bad which is not susceptible to change. If you want to stay ahead of your competitor then you have to keep innovating, flexible in your business model.
What else? If you have more examples I’d love to hear!
You can reach me via LinkedIn
