Is it just me, or does anyone else in b-school really hate talking about sustainable competitive advantage?
In a startup context, sustainable competitive advantage is impossible. Some argue that patents, contracts, or team could give you the upper hand on the competition. But patents become public and can be innovated around (not to mention the patent system is broken), advantageous contracts are next to impossible to get for startups, and who’s to say your dream team is any match for the giants that could easily enter your industry.
What about trade secrets, don’t they give you an advantage? Yeah, if your secret is valuable, but you’ll have to prove its value through time, and time is not something startups can spare.
What about economies of scale or economies of scope? We all hope for those advantages in the future, but its hard to claim them in a company’s infancy.
And yet, b-school continues to ask us about advantages. I had a group meeting today to discuss the subject about a local startup we’re dilligencing (new word). The startup competes with some giants for a market that is still probably 3 years into the future. Needless to say, the discussion was anything but cut and dry. In the end, we played make believe and came up with a couple “competitive advantages” that we’ll argue in class on Monday, but the conversation didn’t happen without much internal conflict on my part.
I’m actually proud, however, of one of the advantages I came up with. It is that a startup is going to have an easier time innovating than its giant competitors.
Am I wrong to say that big companies don’t innovate? I thought that was common knowledge. Innovation is extremely hard for big companies, and for everyone that manages to do it (Apple, GM, Google), there are 1,000 that don’t. After all, there wouldn’t be an “innovators dillema” if innovation wasn’t an advantage.
For startups in particular, I think instead of talking about competitive advantage, we should talk about innovative advantage, and instead of listing our advantages, we should outline a strategy to stay two steps ahead of our opponents. Sure, our next moves may be outdated tomorrow, but at least we’re always thinking ahead.
And back to competitive advantage, to make the topic less painful in the future, I’m going to frame it based on how industry or market is today and ignore the millions of hypothetical events that could be in the future. In other words, if the startup is doing something that none of its competitors are doing, that is a competitive advantage.
Sure, a big company could try to copy everything a startup is doing, but as an entrepreneur, you don’t live your life every day worrying about the bad things that can happen, you just move forward and innovate.