Creating Barriers to Entry Online
Monday, January 22nd, 2007It’s pretty hard to create strong barriers to entry online, especially for start-ups. Without a ton of cash or an army of programmers, Google or Yahoo can quickly and easily swipe your idea and churn out a prototype in mere weeks. Protecting against this potential threat is key.
The best way to prevent users from defecting and joining a competitor service is via strong brand loyalty and a stellar product offering. This cannot be over-emphasized. Just as content is everything to a blog, the product is of utmost importance to a start-up. I hate using cliches as I just did, but it’s true.
Another way to protect against rivals is by harnessing the power of the Network Effect. Though not all companies can use this phenomenon, if you plan accordingly it may very well be a saving grace. Examples of companies who exploit this include:
Partnerships, strong relationships, and/or exclusive deals with select companies may also provide a barrier against other companies. Solidfying relations and maintaing excellent communication is vital.
Finally, some companies turn to a more traditional approach - the Law. It seldom occurs on the net, but sometimes companies file patents to guard their business systems and practices. Examples include:
I don’t think a company should ever bank on a patent or legal barrier. Patents are only as good as your ability to fight them in court. In addition, rivals may find a way to dodge around them or give them a slight twist, thereby bypassing your defence.
Protecting against competitors is key to a successful long-term strategy. However, critical planning and execution is necessary. Failing to do so may erode your user base and ultimately lead to your demise. Don’t let it happen.