Forget the Moat and Make Your Startup a Tropical Island
Building a business should be like creating a destination, not erecting a fortress.
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To be successful, your startup needs a "line of attack," a strategy for "dominating" the market. The first step? Claim your "beachhead." When that's been successfully "conquered," build "fortifications" to protect it from "invasion." This foothold also serves as a base from which you can conduct further attacks to gain more "territory."
Military jargon is commonplace in business. But, this rhetorical shortcut — that a company is a fortress surrounded by a moat — is misleading and counterproductive. Selling is not about "conquering" customers. Similarly, your business is not your kingdom. And your competitors are not your sworn enemies to be fought with to the death.
As any experienced entrepreneur knows, there is no such thing as "your" market. You cannot conquer customers, and you certainly don't own them. Nor can you protect them from your competitors.
The customer is sovereign. Your role is to serve.
Starting and running a successful business is not about keeping everybody out but, instead, inviting customers in.
Your business isn't a moat-circled fortress — it's an island. An island is a refuge from the treacherous ocean, unaffected by depths and waves. When sighted from afar, the island offers direction and the promise of a safe harbor. It welcomes travelers and those in distress.
An island is what businesses should strive to be, something that attracts and comforts.
How does a business become an island? Specialize.
More specifically, by exploiting divisions of labor to create value beyond what other businesses can.
Here are the four ways to build your island.
1. Aim to please.
A beachhead is taken by force. This poor metaphor suggests you establish your business by making that all-important first sale. But entrepreneurs can't capture or occupy customers, and they shouldn't battle with competitors. Instead, they should focus on serving their customers. Whoever serves the customer better, on the customer's terms, will be the more successful entrepreneur. Structure your business to please the customer. The better your offering, the better your business idea.
2. Don't copy. Move beyond.
Competition is not about replicating what others are doing. Such a "red ocean" strategy is unwise as it is costly and has little chance of success — even if you catch up, you're unlikely to exceed. Instead, take inspiration from what competitors are doing, and then add your strengths to go above and beyond. This includes how you structure your business internally. There's no reason to use an organizational chart or apply standard processes. Develop and customize these in ways that fit your business and goals.
3. Build on your strengths.
Every business is unique. Businesses, then, should be uniquely organized and optimized based on their strengths and weaknesses. Sadly, this is rarely how business management is taught. But University of Virginia Professor of Entrepreneurship Saras Sarasvathy has made this core to what she calls the effectuation theory of entrepreneurship. Her take on the bird-in-hand principle is that you must start with who you are, what you know, and whom you know. Where does that put you?
4. Maximize value, not output.
Entrepreneurship is about providing customers with valuable experiences. While it is important to keep costs down, it is even more important to keep value up — value according to your customer, not as determined by you. The price someone is willing to pay for what you offer is based on the value they think they can get out of it. Consequently, the more valuable customers consider your offering, the easier it will be to cover your costs. So make value core to your business!
Businesses should be positioned, structured, and focused on doing their very best — in the eyes of the customer. If you do this and blaze a trail off the tired tracks everybody else has taken, you will discover new specializations and new divisions of labor. It may sound abstract and theoretical but is really about doing different things and doing them differently. And that will set you apart.