Business Exposed176
I don’t remember what I said, but I remember thinking later what
I should have said. I guess it is about “creating value” (and selling
it for more than it cost you to create) but also about “retaining
value” (namely, why wouldn’t anyone else be able to come in
and do exactly the same thing – thus driving the price down till
you can only sell it for what it cost you in the rst place)?
And, of all business plans and proposals I get to see, people
usually think a lot about the rst bit: “how to create value”. They
talk about their unique value proposition, and why customers
will love it, buy it, scream for it, and so on.
But they often forget about the second bit; why would they be
able to do it, or at least do it better or cheaper than anyone else?
What do they have or own that enables them to retain the value-
adding ability, which protects them from immediate imitation by
competitors?
For a start-up, that’s often tricky. You don’t have anything yet, so
what could you possibly have or do that others couldn’t do too?
The trick is that you don’t have to have it now, but you do need it a
year or two from now, when you’re starting to have a real business.
Thus, the thing that makes you “difcult to imitate” does not
necessarily have to be a patent, brand name, unique location, etc.
It could also be found in other sources; something that you build
up over time. Over the years, I have found that one of the most
powerful sources of being difcult to imitate is a rather mundane
thing . . . The rm’s competitive advantage is difcult to imitate
because the rm itself doesn’t quite know what it does to be so
good at it . . .
We call this “causal ambiguity”. It may sound silly but is surpris-
ingly common. Firms, for example, see that they have a much
lower cost base than their competitors, or they see that their
salesforce is much more effective than theirs, or they manage
to have a much lower error rate in their production process, but
they don’t quite know why . . .
Causal ambiguity makes it difcult to put your nger on what it
is you do that makes you so much better than your competitors.