How to Create a Moat Around Your Business - Learn Online

How To Create A Moat Around Your Business

Lesson Details:
February 14, 2020

Video Transcription: Now that we talked about protecting your intellectual property and protecting your ideas I want to talk about the strategy that's traditionally been considered a defensive business strategy but I actually see it as an offensive business strategy and that's the idea of creating a moat around your business if you're not familiar with what a moat is here is a picture of one you see this is a castle but it has this little lake around it and that lake is the moat and traditionally moats are built around castles or towns so that they can be protected defensively right it's way harder to attack this castle if there's a moat around that because while people are trying to cross this mode or people from the castle are shooting arrows at it and stuff like that so that's the moat but how do we create this analogy for your business this kind of a defense that nobody can enter there's a big barrier to competing with you let's talk about that so I'm gonna call this a defensive attacking strategy why because when you're successful everyone is gonna copy your success no question so you have to out succeed everyone and run away from the competition because anyone can copy or rebuild what you built like for example it might take a good software development team to build the core features of Facebook or uber or any of the like Airbnb or any of the cool gigantica billion-dollar businesses it's quick to rebuild that software no problem that's not the problem software is it like a small tiny barrier good teams can build it but what is really nearly impossible to create is that billion users that Facebook has the branding that Facebook has those interactions and the photos that they posted and their friends are all on there. So you can't just get one person to join cuz if we pointless for them they're all their friends are there so you almost have to pull it as a community and that community and all that activity and all that history is becoming a stronger and stronger mode for Facebook every day so let's talk about what kind of businesses moats apply to and how you can build one for yourself and the reason I say that it's a defensive attacking strategy is because you you have to go on the attack and out-compete and outgrow in most cases your goal shouldn't be to just protect protect protect defend defend defend hide hide hide in most cases it should be run away from the competition and out-compete them that's my preferred way of doing that's the way for most technology companies to do things anyway because you have to grow anyway might as well just grow faster and better so what kind of business is it applies to a lot of brokering platforms what that means is bringing people together this can be dating right men and women or you know different people bringing them for dating social sites like Facebook communities forums where people are used to posting and they come back to posting things like that also if you bring together buyers and sellers for example Amazon or creators and consumers like YouTube or course sites at some point these sites they have what's called critical mass after which it's incredibly difficult to catch up to them and they just grow because they grow their brand recognition because a lot of people use them a lot of people talk about them but also they use they grow their user base also a different type of a situation where a mode is used is for highly reviewed products or services let me show you an example of that I'm actually on udemy and I searched for product a blender at the Technology. The reason I search for it is in this space there is one person with the moat it's this course you see the one with the dinosaur why is there a month because he's got 30,000 reviews the next person has 4,000 which is in itself of a moat but the next people have like 400 reviews 27 you see it really drops even though it's a lot of reviews it's nothing compared to this first person that's a moat and you see that everywhere you see that on Amazon you see this in service reviews Heights companies with a lot more reviews than other companies or products that's their mode and they just get that mode and people buy because of the 30,000 reviews that's a big factor in selling and so more people buy therefore more people in review and that perpetuating kind of a snowball effect where maybe the course is not even that good but people just buy it because of the extra reviews and obviously again because more people buy it more people review and the gap just keeps growing it the gap between the first and a second person just keeps accelerating because of this nuance the same that happens with YouTube views that happens with Amazon products that happens in a lot of platforms you might sell so that's the idea of amount don't think of it defensively and don't rely too much on defensive strategies in business you have to attack and be really aggressive most of the time that is more valuable and more effective than pursuing purely defensive strategies.

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