Question

Topic: Strategy

Barriers To Entry?

Posted by Anonymous on 6/1/2011 at 5:13 PM ET 250 Points
Guy Kawasaki in "Art of the Start" states that patents and first mover are weak and ineffective barriers to entry ... i'd be interested in your thoughts and what would be more effective ... particularly for software companies???

Cheers!
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  • Posted by Peter (henna gaijin) on 6/1/2011 at 8:19 PM Accepted
    Patents can be weak barrier in that you only can defend it after someone has gone against you (while at the same time they are taking away market share).

    First moved can be strong, so long as you keep your technology secret. Google has done well with having a top-notched antilogarithm for their search results, and this has allowed them to do well in the past.



  • Posted on 6/1/2011 at 9:10 PM Accepted
    Each case is unique. In many cases a patent can provide some protection; in some it won't. In some cases being first to market is worth everything; in others it's less important.

    My own take is that the brand or competitor who understands the consumer (or customer) best usually wins -- provided they can use their superior understanding to position and market the product/service.

    It's harder to measure "depth of understanding," of course, but it often becomes the critical factor in marketing. Patents can be "measured" (i.e., either you have one or you don't), and being first to market is measurable (i.e., either you are or you aren't). Not so with "understanding" consumer needs, attitudes and behavior.


    Note: Use of the word "consumer" here is an old habit from consumer packaged goods. In B2B situations it could be a "customer," and in many cases there are distribution partners who are really part of "consumer" in this context.
  • Posted by mvaede on 6/1/2011 at 10:59 PM Member
    Guy is very inspirational, in so many ways.

    For me, Software is such a capable business, where tweaks and adaptation / personalization is the rule.

    So, like in most business, process and customer service are the real barriers - if you own the customer expectancies than you've created a very strong barrier to entry. Look at AAPL

    Then sheer volume, sales or subscribers, could be another - yet Software is very flexible, with a few exceptions (contact me offline)

    Mikael
    B2B Social Marketing
  • Posted by Jay Hamilton-Roth on 6/2/2011 at 9:10 AM Member
    For software, you can either patent an expression (look/feel) or an algorithm. It's relatively easy to come up with a slightly different expression to avoid patent infringement. And with software, reverse engineering the algorithm can be done safely with two teams (one to dissect & document it - the other to implement the documentation). There are exceptions to the rule (gestures and new UI elements), but with the speed of innovation in software, what is valuable today becomes much less so in the near future.

    First movers generally have to spend their time/money educating people about the "new" problem/solution (create a market), which means that subsequent arrivals to the market have it much easier. That's one of the premises of Guy's latest book - the Art of Enchantment.
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