Fear of Competition

Aug 17

A plethora of trends have come together to create the perfect competitive storm. It is just too damn easy and cheap to copy existing business models. No technology company is safe from competitors cloning their business and undercutting on price. Worse, big pocketed competitors can play the waiting game and see what works and what doesn’t, then throw together the technology and add layers of service, cut the price, and wait until you die. Scary? You bet it is…

As an entrepreneur this has kept me up at night. Entrepreneurs take all the risk, build a business that works and then wake up to 15 copycats.

In the past a company could rely on the cost of technology as a barrier to entry. It took so much money to create a business that a huge percentage of potential copycats where weeded out to begin with.

The second barrier a company could count on was the technology itself. If the technology was good, one could feel safe knowing that it would take someone months if not years to clone it. That is no longer the case as the tools to build technology are so good that most websites can be redone in a matter of months, if not less.

Branding used to be another great competitive advantage. People would use your business, love it, and never even think of switching. Those glorious days are gone as well. Today we consumers have become a fickle kind. There is so much access to information, that we are always hearing about the new and the better, and we have no problem switching.

Finally, companies used to be able to lock users in with a high cost of switching, extensions, compatibility, and closed standards (think Microsoft Office). The problem is consumers won’t even hear of it today. We live in a world of open standards and people don’t even try closed systems anymore (with the exception of ITunes and the Ipod).

The good news is that all of these reduced barriers also mean the risk of starting a business has diminished substantially, and if you can figure out a way to fight off competitors, then the potential is huge.

Tomorrow I will post my thoughts on how to build a sustainable competitive advantage.

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