Listening to first-time entrepreneurs talk about their competitive advantages is as predictably invalid as the local weatherman’s 10-day forecast.
Between this blog and reviewing applications to Capital Factory I see hundreds of pitches a year. Every pitch has a section on competitive advantages, and quite literally 95% of the time the claimed competitive advantages are pathetic, unoriginal, and not really advantages at all.
The first clue that your competitive advantages aren’t actual advantages is that everyone else on earth claims those advantages too!
Click to see the 8 “competitive advantages” you should avoid pitching >
P.S. Next week I’ll talk about what are real competitive advantages.
Jason Cohen is the founder of Smart Bear Software, maker of Code Collaborator, the world’s most popular tool for peer code review and winner of the Jolt Award. This post was originally published on his blog, and it is republished here with permission.
This is an advantage only until others copy it, so it's not long-term protection against competition. Indeed, the next company can observe what works well and what doesn't, and than improve on your innovation. End users don't care who thought it up, they just care how it works today.
It's common for older products to compete on the fact that they have more features than the competition. Trouble is, customers don't want more features, they want the right features.
As the competition also adds features, they reach a critical mass where they have all the features 80% of your customers want, and then just having 'more' is no longer an interesting selling point.
'No one can compete with my blog because it's copyrighted.' Silly, right?
That's what you sound like when you claim that getting a software patent will protect you from competition. Except in certain industries (e.g. food, drug, medical), I'm unaware of companies who stave off quality competitors through patent holdings. Software patents are especially useless for small, bootstrapped startups. It's even true in hardware: Every mp3 player uses zillions of patents, but that didn't stop Apple from winning.
80% of Americans believe they are better-than-average drivers. Can't be true, right? Well 80% of the folks I meet tell me they're way better than average at SEO, Twitter, and 'building communities,' whatever the hell that means.
Social media and SEO is ever-changing quicksand. You're on top of Google today, gone tomorrow. Other companies being good -- or better -- is completely outside your control, so claiming that you have a sustainable advantage is poppycock.
Everyone has passion. What, you think everyone else quits their job, starts mowing through savings, works long hours, and yet has no passion? Passion is necessary but far from sufficient.
This is like saying, 'My children are going to be more successful because I love them more than you love yours.' This makes investors roll their eyes and show you the door.
The landscape of successful startups is littered with people lacking post-graduate education. If you've lived in the software world for a few years you know the stuff they teach you in school is irrelevant, so who cares what degree you have?
In all the interviews you've read about founders' success, how many credit their MBA program? How many even have MBAs? It's not bad to have a degree, but neither is it a significant advantage.
You hear about the 37signals guys working 30 hours per week and Tim Ferris just four hours (bullshit!), so you figure if you work a 'healthy' 70 hours per week, you'll win! But working harder is not, in fact, smarter.
And even you could work 70 on-task hours per week, that's still blown away by 10 developers at a funded company or even 10 passionate open source developers working part-time.
It's not bad to be cheaper. Indeed, at ITWatchDogs, the company I did before Smart Bear, being inexpensive was critical to our strategy. The key is that you cannot compete only on price, because then all a competitor has to do is lower their price.
Established companies can destroy you with the 'lost leader' strategy (e.g. when Microsoft put 1,000 developers on IE and gave it away for free, destroying the market for web browsers), newly funded companies can spend ludicrous amounts of money to get market share (even if it means taking you down with them), and anyone can implement a 'freemium' model.
In the case of ITWatchDogs, the reasons we were cheaper were that (a) we sold direct instead through a channel, so our product wasn't marked up 6x before it got to the customer, and (b) we used the newest, cheapest parts whereas our established competitors had stopped innovating and were using expensive 5-year-old parts.
Haven't I just claimed that the fruits of intense effort and innovation and one-upmanship isn't enough?
Fortunately, there are plenty of ways to have true advantages that competition cannot readily overcome
Unfortunately, they're difficult and rare. Of course they are! What, you thought creating and running a successful, untouchable startup was easy and commonplace?
Next week I'll go into depth on some true unfair competitive advantages -- ones that cannot be overcome even by a giant company, a funded company, a bootstrapped company, or an open-source movement.
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