A question any startup founder should ask themselves at the earliest opportunity is whether their idea is defensible. Put simply, this means how protected is your business (or proposed business) from competition?
When analysing how defensible your project is, it is important to understand who the competition is. Could it be a major player such as Google or Facebook who may decide to roll out a competing feature, or could it be existing, or soon-to-exist startups with a similar idea and plan as yourself? Both types of competition represent very different threats.
Let’s look at each of these in turn.
To take a rather extreme and simplistic example of an indefensible product, would be supposing that you were unhappy with Mark Zuckerberg’s decision that Facebook will never implement a dislike button. There are very good reasons for Facebook to avoid doing this and they have been very public about it, but despite this, you see an opportunity for a social network that allows for a much wider range of emotive responses to posts including a dislike button.
You feel an extreme confidence in your ability to build a solution to exploit an obvious gap you have identified in Facebook’s product offering, and set about throwing time, money and effort into producing a competing, better (in your opinion) product.
But large corporations rarely make such decisions on a whim, and that Facebook’s decision to avoid negative emotional reactions to posts is well thought through. The likelihood is that Facebook is right and you are wrong, and that your efforts will ultimately prove futile due to your incorrect premise. However, large corporates do get it wrong and maybe this is one of those examples.
You begin the large-scale effort in building a new social network. You plan for it to be much like Facebook, but with your own look and feel, but most of all you’ll have these additional emotive features that Facebook has mistakenly chosen to ignore. You use your contacts in the industry and obtain plenty of column inches in the tech press. You manage to secure an adviser who used to hold a senior position in a company who is renowned for the success of their own social networking product.
You are winning! Everything is going the right way and you are just a few days away from the product launch. Virtually all feedback has been positive and the excitement is fervent.
How have Facebook managed to make such a mistake which has presented you with this opportunity?
Of course, we will never know the true answer to that question, but it doesn’t matter. Your product launches and you secure 10,000 sign ups in the first few days, then 20,000 the next day. By the end of the first week you have exceeded 100,000 sign ups – a result beyond your most ambitious expectations.
But then, you check out the reaction on Facebook amongst your friends and trusted advisers, and to your dismay you discover that young Zuck has only gone and done a u-turn. Not only can you now dislike a post and give it a proverbial ‘thumbs down’, but you can positively ‘hate it’, ‘loathe it’, ‘kill it’ and more negative emotions than you can even contemplate in your fit of rage!
That Zuck ripped me off!
Facebook may well have realised the error of their ways, and all it needed was a little competition to demonstrate they had it wrong. To implement the very feature they had long overlooked was a triviality, and the ensuing result sees your sign up rate drop to zero. You’re dead in the water because your idea was not defensible.
For a long time you’ve been dwelling on an idea that you know will sell like hot cakes. Through your working life, you’ve carried out your trade in a number of disparate industries, and one day had the genius idea of blending technologies from two of these industries and create a widget for widgeteers. You’ve known many widgeteers throughout your life, you have friends who are widgeteers, and even suspect some of your work colleagues to be widgeteers. Sure, they already make us of a widget of sorts, but your idea for a widget is so much better, that the existing widgets will end up as yesterday’s news.
Following a particularly bad day at work you decide enough is enough. You’ve previously tried to raise finance for this W4W (Widget for Widgeteers) venture and had no luck, but you are sure it is such a good idea you struggle to understand why no-one is seeing your vision. You remortgage the family home and begin hiring the right people to turn your dream into a reality.
Finally the day comes and your site is launched providing W4W. You see some initial promising traction from friends, family and fellow widgeteers who genuinely agree that this new type of widget is excellent. After a few months of operating, one of your widgeteer friends who hasn’t yet bought a widget shows you another widget he bought off Amazon and he claims it is awesome. You take a look at it and sure, it’s good, but not as good as yours. You do a bit more research and everywhere you look you see this competitor widget – it is almost like they are goading you.
Sales start to fall, they are winning exactly the sort of awards you should be winning and being featured in articles that should be about you. Worse is to come as you notice on LinkedIn that one of their Directors is connected to one of your widgeteer friends who you first shared the idea with. After a little bit of investigation, your concerns are realised:
They stole my idea
As sales begin to tend towards zero you see more companies spring up selling widget-look-a-likes. None of them appear as good as your widget, and you feel anger and sorrow at allowing yourself to be ripped off in such a manner. You resign yourself that you’ll never see any success when the high flying businesses appear to be run by unscrupulous plagiarising executives.
Both examples, although contrived, show how ideas, or even products can suffer due to competition. In the second example, the startup owner not only had an idea that was indefensible, but additionally had fooled themselves into thinking there was intrinsic value in the idea alone – whereas the real value existed in the skills required to turn it into a successful business and exploit the available market. Although the startup may have ‘copied’ his idea, they did not steal it as they did not deprive him of the opportunity to turn it into a successful business himself. It is the execution of the idea, in creating a thriving business where the value is unlocked and realised.
This may all sound ‘doom and gloom’, but it is not. You only have to look around you to see lots of examples of different companies, both large and small, selling seemingly similar products, but when starting out, it is important to have a clear understanding of how you will deal with competition. If you have happened upon a genuinely good idea, you can be as certain as when night follows day, it will be copied, and those copying it may have more resources, more money, and a better product than you.
Here are a few things to consider to help make your idea defensible:
- Patent – If you have a product that could be patented, or that an intrinsic part of it may be able to secure a patent, then it is worth investigating. Once a patent is secured, people cannot sell copies of your product in territories where you hold a valid patent. This enables you to build a virtual monopoly, or to license your product or technology for others to use. It is important to understand that in many territories it is not possible to secure a patent on a product that has already been made public. If you think you may be able to patent your idea, you should begin investigating at the earliest possible opportunity.
- Complex design – Your product may be more than just a clever idea, but may do something that was previously very hard to achieve. It may make use of a very complex design or algorithm that would be difficult to copy or reverse engineer. This creates a barrier to entry for any other business wishing to enter the same market.
- Unfair advantage – In startup circles, potential investors might want to know about your unfair advantage. This could manifest itself in a number of ways. For example, you may have secured exclusive rights to sell someone else’s protected technology; you may have insider knowledge such as research that demonstrates a market that is far from obvious; you may have celebrity backing with endorsements from celebrities who love your idea and product; you may have access to a data set that is vital for your product to work that others will not have access to. The list is endless, but if you are able to identify a particular unfair advantage which cannot be obtained by others, regardless of their resources, you will have a powerful head start.
- First mover advantage – A benefit can be obtained by being first to market. You can gain a head start and become the incumbent player before the competition has had the opportunity to create an impact. The more complex your product is, the more time it may take for competitors to copy it, allowing you more time to capture the market. Be warned though, first mover advantage is often overrated. There were many search engines before Google, and Facebook wasn’t the first social network.
Hopefully this article has helped with understanding the importance of thinking about how defensible your product idea might be, and some of the things to consider to give you an advantage.