Connect with us

Hi, what are you looking for?

Online Business Success

Every early-stage startup must identify and evaluate a strategic advantage – TechCrunch


GettyImages 1203752624

Whether you’re building a company or thinking about investing, it’s important to understand your strategic advantage. In order to determine one, you should ask fundamental questions like: What’s the long-term, sustainable reason that the company will stay in business?

The most important elements for founders to consider when figuring out their strategic advantage(s) include one-sided or “direct” network effects (e.g., with social media sites like Facebook), marketplace network effects (e.g., with two-sided marketplaces like Uber), data moats, first mover and switching costs.

Let’s take a quick look at an example of one-sided network effects. At the very earliest stages of Facebook’s existence, it was just Mark Zuckerberg, a few friends and their basic profiles. The nascent social media platform wasn’t useful beyond a few dorm rooms. They needed a strategic advantage or the company would not make it beyond the edge of campus.

Advertisement. Scroll to continue reading.

A successful startup without a strategic advantage is just a validated business model vulnerable to copycat companies looking for a market entry point.

In fact, Facebook only truly became a useful platform — and accelerated as a business — when more users came into the fold and more types of email addresses were accepted. Add to that the introduction of an ad marketplace revenue model and you have a clear strategic advantage — based on one-sided network effects — that gave Facebook a strategic edge over other early social media sites like MySpace.

These one-sided network effects are different from two-sided network effects.

A strategic advantage is paramount to maintaining market share

Image Credits: Canvas Ventures

Two-sided network effects are most common in marketplace business models. In a two-sided network, supply and demand are matched, like Uber riders (demand) being matched with Uber drivers (supply). The Uber product is not necessarily more valuable just because more users (riders) join, the way Facebook is more valuable when more users join.

In fact, when more users (riders) join the demand side of the Uber network, it might actually be worse for the user experience — it’s harder to find a driver and wait times get longer. The demand side (riders) gets value from more supply (drivers) joining the platform and vice-versa. That’s why it’s called a two-sided network, or a marketplace.

Regardless of industry, a successful startup without a strategic advantage is just a validated business model vulnerable to copycat companies looking for a market entry point. Copycats can range in size from startups with similar grit to large companies like Facebook or Google that have limitless resources to drive competition into the market, and potentially run the startup with the original idea out of business. This vulnerability can prove fatal unless a startup’s founding team explores and embraces one or more strategic advantages.



Source link

Advertisement. Scroll to continue reading.
Click to comment

Leave a Reply

Latest

Online Business Success

Entrepreneur, Author, Speaker, CEO & Founder of Social Dynamic Selling. Connect with Rylee getty I love sales. One of the reasons I fell in...

Technology

In context: Brazil’s government doesn’t have the best relationship with Apple, and it could get even worse if the country follows Europe in making...

Online Business Success

President of GMR Transcription Services, Inc., which provides highly accurate transcription and translation solutions. getty The Wall Street Journal reported that 73% of virtual...

Online Business Success

Odell Mitchell III is an organizational effectiveness consultant, attorney and the Founder of Three Kindnesses. getty Your team leaves the conference room after a...

Online Business Success

By Jack Perkins, founder at CFO Hub, which provides on-demand CFO, controller, accounting and HR services. getty Whenever entrepreneurs prepare to run the fundraising...

Loan And Finance

It’s not easy for a new breed of professionals to navigate the changing conditions of the insurance landscape, but Insurance Business America firmly believes that there...

Advertisement

You May Also Like

Uncategorized

Introductions get a lot of attention. I’ve explored the topic of how to write them even though as a reader, I always skip them....

Online Business Success

The internet is now our nervous system. We are constantly streaming and buying and watching and liking, our brains locked into the global information...

SEO Guide

There are all kinds of pictures of the world on the internet, but to find one of these specific pictures that you want to...

Online Business Success

You can think of link building in many ways. I like to call it tedious, painful, and a test of patience. It’s also necessary...

Advertisement