ESYB2 032 - Protect Your Business by Creating a Moat Around It
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[00:00:00] 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. It's way harder to attack this castle if there's a moat around it because while people are trying to cross this moat, 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, like a big barrier to competing with you. Let's talk about that. So I'm going to call this a defensive attacking strategy. Why? Because [00:01:00] when you're successful, everyone is going to 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 like Airbnb or any of the cool gigantic billion dollar businesses.

It's quick to rebuild that software, no problem. Software is like a small tiny barrier. Good teams can build it. But what is really nearly impossible to create is the 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 because it would be 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 [00:02:00] day. So let's talk about what kind of businesses modes apply to and how you can build one for yourself.

And stay safe. The reason I say that it's a defensive attacking strategy is because you have to go on the attack and out Compete and out grow 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 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 businesses applies to a lot of brokering platforms? What that means is bringing people together. This can be. Dating, right?

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 [00:03:00] 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 grow their user base. Also, a different type of a situation where remote 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 Blender. It's a technology. The reason I searched for it is in this space, there is one person with a moat.

It's this course. You see the one with the dinosaur? Why is there a moat? Because he's got 30, 000 reviews. The next person has 4, 000, which is in itself a moat, but the next people have like [00:04:00] 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 review sites, companies with a lot more reviews than other companies or products. That's their moat. And they just get that moat and people buy because of the 30, 000 reviews. That's a big factor in selling. And so more people buy, therefore more people review.

And that's a 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 between the first and the second person just keeps accelerating because of this nuance.

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 a moat. Don't think of it defensively and don't rely too much on defensive strategies. In [00:05:00] 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.

