• http://www.pikk.com Kevin

    Jason- I agree with all of your points, but I have a sneaking suspicion that your upcoming “true” competitive advantages are all going to be easily discounted. In the internet startup domain, there really aren’t *any* competitive advantages, except first mover advantage, branding, and tons of cash. Looking forward to your follow up to see if I’m wrong.

    • erwin

      I don’t know about that Kevin. It’s possible to come up with a truly novel way of handling available data (or creating your own datasets), in a way others don’t, that translates into significant advantage in the user’s mind. Think Google’s link algorithms vs Altavista’s text parsing. Think Pandora’s musical attributes database vs other’s genre based recommendations. Those “secret sauce” and “sweat equity” assets are hard to duplicate, even after you see them in action.

      • WC

        And that can be copied, so falls under the ‘not a competitive advantage’ banner that this post talks about.

      • http://ryansidea.blogspot.com/ Ryan Chatterton

        I think when it comes down to it, it’s a personality thing. Shitty people run shitty companies.

        If you care about what you’re doing and your product and your customers AND your staff, then you’ll have a shot. It’s really stupid to sacrifice any of these for any of the others.

        Companies that continually challenge what they do and how they do it are being innovative. Striving to do EVERY aspect of your business better will make you stand out. Anything less will eventually weed you out.

        • walter daniels

          Absolutely. There are only two “competitive advantages.” 1) The brand you establish, in the public’s mind. 2) Deciding that you want to be one of the best, not one of the biggest.

  • http://www.straysoft.com Stray__Cat

    Is it really necessary to have a competitive advantage? Is it a bad plan to be a cheaper/costlier leaner/fatter smarter/dumber competitor for a share of the market?
    Is it wrong to aim to one of the possible equilibrium points in the market and sit on it?

    • http://blog.asmartbear.com Jason

      Great question, and no I don’t think you must have a competitive advantage from the outset. I do think you need to develop something strong over the years to build a sustainable business, and if you do have one at the outset it certainly improves chance of success.

      As I say below though, the danger is in thinking you have an advantage when you don’t, because then you’ll make other incorrect choices, including not seeking an advantage over time.

      • http://www.itarsenal.com Rob

        Well now that makes sense. If you keep things in a perspective mindset. You don’t have to have a competitive advantage, but it’s nice for longevity. I’m interested to see what’s going to come up as real competitive advantages, I’m thinking some sort of word play, or combination of the above.

  • http://twitter.com/fanfa Transeunte

    Ok, now you got my attention. Can’t wait to read what’s coming next!

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  • John Williams

    You’re making us wait a week for to find out about true competitive advantages??? I have a business to run now!!!! Arrrghhhhhh!

  • http://www.alexblom.com Alex

    Hi Jason,

    I tend to agree. The problem is in schools what you mention is still taught as competitive advantages for in far slower moving, less nimble industries most of these are infact a competitive advantage.

  • http://www.hellofax.com Joseph

    I’ve been a big believer that having one, super compelling, killer feature — combined with a super usable product is a good start. But, you’re right, features can be copied.

    Thanks for the post. Looking forward to what you come up with.

  • http://www.tonywright.com Tony Wright

    I’m LOVING this series of posts.

    As you talk about advantages, it’d be interesting to talk about the competitive advantages of some of the current startup darlings as well as a few of the exits over the last 5 years. I think most successful startups didn’t have credible competitive advantages in the earliest years of their companies.

    • http://blog.asmartbear.com Jason

      I agree. In fact I don’t believe a startup needs to have a killer competitive advantage to be successful.

      The danger is in thinking you have an advantage when you don’t, because then you’ll make other incorrect choices, including not seeking an advantage over time.

  • http://arturadib.blogspot.com Artur Adib

    Hi Jason,

    Although I agree that an additional feature per se cannot make a product stand out, there is one case in which it can mean everything: When the product is built entirely around that feature.

    See insightful discussion by Dustin Curtis on Posterous:

    I’d also add Twitter to the list. Any social networking site or blogging platform could have added the feature of short text messages to their already existing user base. In a sense, Facebook encompassed it with its News Feed.

    And yet, Twitter clearly stood out; the feature (short text messages) *was* the product.

    • http://www.esculonsays.com Alex @ Esculon

      I think Twitter had the first mover advantage…first to hit the market and offer this new feature. They got big really fast and it’s much too late for any competitor to compete using the same feature.

      That’s why for bootstrapping startups, a single feature is might be meaningless unless they’re first to the market and can create a big enough stir.

      • http://www.searchengineoptimisation.com Mike

        I think its true for twitter and facebook at same time although FB been in bad shape from some time, competitors are always their for any products or services, i have heard that “Google Me” Social Network will be same as like FB with more easy features.

        I agree with this post that most users care what features they want as compared to the quantity of the features and same logic is being adopted by google while Google Me will be coming soon to try and check

  • http://www.bidsketch.com Ruben

    Great post Jason! Though you have me questioning if there’s any real unbeatable advantage an unknown bootstrapper with no connections can have. I have a few ideas here and I’m currently focusing on them in the next few weeks/months but after reading your post what I’m thinking is probably more USP than unbeatable advantage.

    I know this series is centered around pitches startups make (to get into an incubator or get funding) but these tough questions are great for any person with a product to ask themselves. I zero intention on receiving funding or doing the startup incubator thing, but asking myself these types of questions makes me uncomfortable sometimes — that’s a good thing.

    • http://blog.asmartbear.com Jason

      But it’s true isn’t it? That if you have no network, no existing attention stream, no special features, etc., that means you have a deeper hole to dig out of.

      However all is not lost. Consider: I was exactly in the position you described when I started Smart Bear. No connections, no network, no blog, no product, nothing. So clearly it’s possible!

      More in future posts…

      • http://www.bidsketch.com Ruben

        I like the analogy of digging yourself out of a hole. I started with nothing and in a few months I have gained blog subscribers, hundreds of paying users (which means recurring revenue and feedback), blog subscribers, a glimmer of a network, and so on. I still have a long way to go but I know that I’ll find a way to get there one way or another.

        Looking forward the other next posts!

  • http://techneur.com JP

    This article is like foreplay… and then you just stopped! I can’t wait for next week!

  • http://www.biggleszx.com/ BigglesZX

    Great post, and very true. Reminds me of the cliches you hear trotted out at job interviews.

    One minor correction: I’m pretty sure “lost leader” in the “We’re cheaper” section should read “loss leader”.

    Looking forward to the next article :).

    • http://blog.asmartbear.com Jason

      Right you are, and thanks for the correction; it’s in the text now.

  • James

    I think you mean “loss leader”. “lost leader” is probably an eggcorn: http://en.wikipedia.org/wiki/Eggcorn

  • Neil

    Thanks for putting into words what I have been thinking. I too have to listen to some of these “advantages”, mostly from my boss, who has probably hit 6 of your 8 listed within the past 2 years alone.

    I have been trying to tell him clients either don’t care or like you said, roll thier eyes when they hear some of these in sales pitches.

  • http://www.loopycode.com Edan Maor

    One question springs to mind: how much should small companies *care* about being copied?

    Obviously a startup should have some competitive advantage, but I see a lot of software which competes by being better, having a better design, etc (e.g. 37 Signals’ software). These are things that can “easily” be copied.

    • http://blog.asmartbear.com Jason

      Great question.

      I think you shouldn’t care too much about being copied, exactly because if you’re idea and execution is great you will be copied.

      Your point is really the point of the whole article, which is that these typical notions aren’t competitive advantages, and maybe they don’t matter as much anyway as other aspects of execution, some of which I’ll be talking about in the next few posts.

      • Michael

        Isn’t it so much about copying as it is about the tipping point(s) that results from cheaper to acquire vs cheaper to compete against?

        Where market share is probably a big factor as it’s ‘expensive’ to gain market-share in a saturated market. etc.

  • kris

    Thank you, great post, but consider doing a follow up post because telling us what’s not a competitive advantage is like telling us what you don’t like to eat on our 5-minute lunch break.

  • jeteye

    I cannot wait for next weeks competitive advantage blog to see how many I have? :-P

  • http://metamorphblog.com Matt Mireles

    I get your point, but I don’t really see how this is helpful. Tell me what is a competitive advantage.

    • http://blog.asmartbear.com Jason

      As the post says… tune in next week. Too long for a single post.

  • http://www.sixmonthmba.com Al Pittampalli

    Jason, another great post…looking forward to the next one.

  • Sanjay parekh

    Why is it necessary to have unfair advantage? Doesn’t competition validate the market? Isn’t it true that if you are going to get copied then what keeps you in business is either a big enough market for all the players or a small niche that no else would care about.

    • http://blog.asmartbear.com Jason

      I’m overstating a bit — I actually don’t think it’s required to have one up front.

      It is important to work towards one, and it’s important to not incorrectly think you already have one if you don’t.

      This will be clearer in the next post where you’ll see that you might be able to make progress in this area but still forge ahead.

  • carin

    I think a competitive advantage would be passionate users who tell others about your product, your great service, and the way you made their life easier. Anyone can copy a product, not everyone can have truly passionate users who love what you do, that you reply to emails and return calls, and that you go the extra distance in order to satisfy a need.

  • http://boratmoney.com/ Borat money

    great post, I look forward to continuing

  • Erik Dungan

    Good post. What about something along the lines of “We offer the best customer support”? Would that count as a competitive advantage?

    • http://blog.asmartbear.com Jason

      It can if it’s overwhelmingly true and not just something you say. For example it’s true for Zappos but it’s not true for phone companies.

      For detailed examples of how to take something like that which is an advantage if you 100% own it, see this post.

      • Erik Dungan

        So, for a brand new startup, it’s probably not going to carry much weight when submitting a pitch …

  • http://www.gnip.com Eric Marcoullier

    Love the article and am excited, like everyone else, to read part two next week.

    I’ll go out on a limb and suggest that one of the core unfair advantages is deep experience in the market your company inhabits. Experience is primarily a function of time and it’s hard for a company to quickly move into your space and successfully copy your business if they don’t have the experience that informs the “why”s as well as the “what”s.

    The corollary is that if you start a company in a space where you don’t have deep knowledge, you’re relying tremendously on luck. Luck outcomes can certainly happen, and investors often like to claim that they like inexperienced teams precisely because they don’t know what can’t be done, but usually, if you dig down deep, you’ll find a huge reservoir of applicable knowledge right below the surface.

    • http://blog.asmartbear.com Jason

      You have correctly guessed one of them, yep. :-)

      • http://www.gnip.com Eric Marcoullier


        Can I also guess that traction is also an unfair advantage? Nothing like delighted, paying customers or tens (or even hundreds) of thousands of users to separate you from the pack in a foot-race.

  • http://www.SimpleConnexion.com Ziad Salloum

    Good analysis but depressing and frustrating for people who are thinking of a startup. You gave a black picture and anyone who wants to venture will hesitate.
    However I think that even in competition there is some differentiating features. I agree that it is not easy to be the next google or the next facebook. But I believe that making a difference in just one or few features will make some customers prefer you over the competition.
    Now why the competition can’t follow? Not because they are unable but simply because they have chosen another path that has its own fans too.

    Bottom line, I think the best way to succeed is to keep trying until you find the right combination…that’s what I am doing

    • http://blog.asmartbear.com Jason

      I see what you mean, but let me give you some hope:

      It’s not necessarily true that competition is that important anyway. Is any startup free of competitive worries? Do most startups have “true, devastating” competitive advantages?

      Nope, not even the successful ones.

      I write a lot of articles about how to be successful anyway, so that probably didn’t come through in this particular post.

  • http://improvingsoftware.com John Fuex

    Excellent article, Jason.

    It got me thinking about how the discussion of a particular start-up’s competitive advantage can fall into the trap of the perfect solution fallacy.

    That is, the assumption that the competitive advantage must result in your new company dominating the market and locking out any real competition. Maybe it is just an entrepreneurial predisposition to swing for the fences, but in many instances there is clearly room for a company to provide value to a marketplace without shutting out the competition simply. Good execution of a practical business plan that doesn’t require insane viral growth to succeed, even without an earth shattering innovation should be enough to get a solid company up and running profitably. [Speaking from complete inexperience here]

    This type of thinking is probably at least partially responsible for some of the more quixotic prognostications in the business plans you are seeing. Perhaps it is (or seems) necessary to assume world domination to get the attention of investors in the current climate.

    I am just so burned out on the “This website will change the way the world buys waffles on the Internet” type pitches, that If it would require kind of hyperbole to get VC funding, I’d prefer just to start a company and grow only as quickly as I could on borrowed money and sweat equity.

    • http://blog.asmartbear.com Jason

      100% agreed. That notion is driven by the VC community, and it’s something you probably have to adopt if that’s where you want to take your business.

      But that’s not the goal of most businesses, and ironically wasn’t the goal of many businesses which, in the end, did end up changing the world!

  • http://www.aaronstannard.com/ Aaron Stannard

    I’d argue that the best, true competitive advantage is a defensive ecosystem – that’s what allowed Intuit to ward off a giant like Microsoft when they tried to capture QuickBooks and Quicken’s marketshare with products like Microsoft Money.

    Their ecosystem consisted of thousands of small businesses and third party accountants (think small firms or sole practicioners) who handled all of their finances using QuickBooks as the common platform for exchanging information, and in order for MSFT to get any penetration in that marketspace whatsoever they would have needed to persuade all of those individuals that it was worth their while to switch, which is expensive, time-consuming, and really damn hard to do. Ditto for individuals with Quicken and the same network of accountants.

    Those networks are very difficult to penetrate and tear down, but they’re equally difficult to build, which is why for every story like Intuit’s you have hundreds of stories like Netscape’s.

  • http://www.employee-scheduling.com James F.

    From business books, earning my degrees, and in actual startup practice: A competitive advantage is anything that makes you different from your competitors. I think if you rewrote the title to “competitive advantages that are slowly diminishing away or no longer working as well” then I could agree.

    But if you blow your competitors out in better design ( = better web app product), better features ( = better web app product), better marketing, better SEO (and yes SEO can be permanent if done right and upkept well), better founders (more skilled, more driven), better customer support, etc. then yes you clearly have a competitive advantage

    Also, you may be confusing thinking that these ‘competitive advantages’ don’t work anymore or aren’t even ‘competitive advantages’ anymore because you hear them so much from overly-optimistic pitchers and see them fail. But often times the barrier to entry on any of those advantages is high to execute right and if the correct action, execution, and luck isn’t fully done 150%, then most times it will fail. So you could easily go back and say the biz plans, model, and fundamentals (including ‘competitive advantages’) were flawed from the get-go, when a lot of the fails were due to poor execution.

    For example: I can take a quick look on Google and tell you that SEO is a definite ‘competitive advantage’ and can kill competitors. Take Rand from SEOmoz.org and put him into his own business of selling fish tanks and give him fishtanks.com and let him do SEO work. Tell me it’s not a ‘competitive advantages’ after he demolishes the entire online fish tank industry and robs 50% of the market.

    Sorry got long winded..
    James F.

    • http://blog.asmartbear.com Jason

      Great points, thanks for showing up for the other side of the argument. :-)

      Yes having Rand do SEO work is a competitive advantage (more on that next week). Since we can’t all be experts at all these things, yes it helps to focus on one or two things you’re really going to kill it on. Still, none of these things feel like solid, long-term ground.

      More than anything, I feel that everyone claims these same things as advantages and yet aren’t particularly good at them. That is, just because you have a “different” feature not enough to be a (significant) advantage.

      • http://www.employee-scheduling.com James F

        Very true! I agree with you a 100%.. many claim to be able to just because they see they can be different, but with no proper execution, that difference will have never been a difference..

        Also, as far as long-term, I honestly think in the internet industry, long-term is non existent. It is a bunch of short-term bursts, and if the company refuses to adapt every few months, they will get passed.

        It seems in the internet world, what is a competitive advantage today can easily be duplicated and will no longer be different, so you gotta keep moving and innovating to stay ahead and shift that competitive advantage.

        I look forward to part 2!

        James F.

  • http://www.insightbydesign.biz Paul

    Ad to top it all off, my guess (at least it’s been my experience), is that if you ask your Marketing guy, your Tech guy and your Sales guy what your competitive advantages are, they would all come up with three different answers!

    So you are essentially saying Jason (from your comments) that the only really true competitive advantage is to realize you don’t have one. And that’s what keeps you competitive.

    • http://blog.asmartbear.com Jason

      Maybe that you don’t have one (which could be OK), or maybe you could have one, it’s just not one of these.

  • Mark Morrison

    “Almost anything can be copied. In fact, I’d claim that anything of any value will be copied.”

    I recently bought a Rolex knock-off in Thailand. It stopped working after 1 month.

    Your statement is wrong. You need people with TALENT to copy something. There are only a limited number of people with talent in the world, and they usually won’t settle for just copying something. They want to create something great.

    You gave Microsoft writing IE as an example. Microsoft at that time had access to some very talented developers. Why has Zune failed to compete with the iPod? I would argue that people with the talent required no longer work for Microsoft.

    • http://blog.asmartbear.com Jason

      Zune “failed to compete?” Really?

      So Pepsi is a failure because Coke is more popular? Just because you’re #2 doesn’t mean you’re not competing…

      • Kjartan

        Great point!

        You dont have to be number 1 to make big bucks, you can always be number 2 and let number 1 feel the competion really hard, and still make lots of bucks.

  • http://www.michaelgugel.com Gugel

    Nitpicking a bit here, but it actually is possible that 80% of people are better than average.

    Let’s say there 100 people took a test. There was only 1 question. You either got it right or got it wrong.

    80% of the population (80 people) got it right and they got 100 on the test.
    20% got it wrong and got a 0.

    The average score of the entire 100 person population is 80 AND 80% of people scored above average.

    There can be no more than 50% of the people above the median though. In large, natural populations however, the mean and the median will likely be very close (a bell curve).

  • http://pg.com Charles Fisher

    Very nice analysis. Some business models don’t require a sustainable competitive advantage, if you plan for having other people in the market in the future. For Small/Medium Size Enterprises there are some very good markets that don’t require that you dominate to make a good deal of money. I work for a large multinational and for us to begin, we have to see a win long term, so competitive advantage is something I think about a lot. This can come from Patents if it’s a compound, from Competencies if it’s a service or near commodity (for example you understand the consumer best, so you choose among desired feature sets well, even though they are all easily duplicated). Keep up the good sharing.

  • http://www.jimgrayonline.com Jim Gray

    man…this is good stuff…

  • http://www.orlandobrea.com.ar Orlando

    Nice post! I agree in almost everything.

    Yesterday I assisted to an entrepreneur talk. Many people spoke about their project/idea, and what I’ve noticed is that many of this points were said (by them) as competitive advantages. The main advantage, most of them, mention was… “expertise”. I know it may be a competitive advantage sometimes, but when you heard it from 1, 2, 3 people and more, it doesn’t seems an advantage.

    I think many people misunderstand what means doing a start up and a company, many think that working on a company for many years, gives them all the necesary skills to start their own project. But, a new company is much more than a couple of skills or experience.

    For example, many people on a start up sells themselves, but the people or the client or the VC, doesn’t matter who is he, but yes what does this person/company has to offer. The same problem comes when a person tries to sell a feature, and not a benefit.

    Well, that’s my point.

    I like this post, and I’m waiting for the next ones soon.

  • http://stickermule.com/ Anthony

    Competitive advantage online is a lot like competitive advantage offline. Can you do something that either a) costs a lot of money b) takes a lot of labor to duplicate c) takes extraordinary brain power.

    A few examples:

    1) Achieving an extraordinarily high traffic conversion rate.
    2) Ranking well in Google for highly competitive terms.
    3) Polishing your design to the point where users have a significantly higher satisfaction with your site / application.

    And of course, we’re less expensive due to investments in XYZ always works. The point about “we’re cheaper” not being competitive advantage is true. But, “we’re able to delivery X at a lower cost than anyone else” is competitive advantage.

    Example: DuckDuckGo is a search engine being ran by one guy. The fact that he figured out how to develop and maintain a usable search engine without needing outside help is a major competitive advantage. He doesn’t need to take in massive ad revenue to be profitable. That’s the essence of competitive advantage: build a profitable & defensive position.

  • http://www.fg2.com Steve Golab

    Thanks your post is thought provoking. In a recessionary environment like this, one of the best advantages I can think of is a low cost structure.

  • http://www.debutmarketing.com.au Cameron Douglas

    Best Competitive advantage = being awesome :) so many depressed people in the world – its east to stand out – Barney Stinson style!

  • http://www.nagarro.com dhiraj

    Excellent points for early start up. thanks

  • http://www.ttmcommunications.com Scott

    The comic up top was worth the price of admission…

    Being new to the social media environment, I am working to get caught up with this series. I appreciate the insight, and after this post I’ll say this: I am hooked.

    Thanks Jason, for the investment in this…

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  • http://yourjrep.blogspot.com winston

    Why do I get the feeling the competitive advantage has to do with providing the best customer service that builds brand loyalty from your customers…but this article was a brilliant read, one of the few I’ve read in a LONG time without all the hot air advice that people already knew anyway

  • http://www.howt-to-start-a-pest-control-business.com Vince Ammon

    I was getting scared until you said you don’t actually need a competitive advantage. There was one comment above that mentioned if you and your people are always striving to be better than the competition in every way, that’s how you’ll stand out… I think that is a valuable insight.

  • walter daniels

    I would have to say that there are similar factors at work in Advertising and Marketing. Pursuing the “latest and greatest” theories has caused the old knowledge to be lost. Everywhere, you hear about how much it costs to get new customers, and how you should pay attention to existing ones. Except, so few seem to pay any attention to it.

  • http://austintechgeeks.com Ricardo Sanchez

    Hi Jason, this is a great post! one question, if you really love what you and your startup is doing, does that give you a competitive advantage over startups who are offering the same or similar product/service just because is cool or popular? I mean, one thing is being “passionate” about the startup… and another thing is to be in love with what you do.

    For example, I know you love writing about startups and ways to become successful (and thanks for that!), doesn’t that give you a competitive advantage over someone who starts a blog and writes about the same topic(s) only because the topics are popular?

    By the way, congrats on your new company – WPEngine.

    • http://blog.asmartbear.com Jason

      No I don’t believe “passion” or “love” is an advantage. It’s like saying “love conquers all.” It’s necessary but not sufficient, and for certain kinds of companies it’s not even necessary.

      I would agree that persistance can be an advantage. Sticking it out through the crap, going out and asking for what you need, willing to wade through years of crap to get to the end.

      Still it’s not enough, because you should assume your competition has that too. Enough of them will.

      • http://austintechgeeks.com Ricardo Sanchez

        I disagree. Maybe I consider loving what you do a little different than just having “passion”.
        For example, as you mentioned before, most startups and entrepreneurs have passion, they all work hard, are persistent, etc… However, I think there is a difference between startups that concentrate in doing some service or product because that is what’s popular and “sexy” at the moment and those that concentrate on a service or product because it is what they believe in and what they “love”.

        Here are a couple of good examples… startups that love and believe on what they do usually offer products that might not be “sexy” or popular, and yet they are very successful. Take 37Signals, Fog Creek Software and Zappos as an example, all of these companies have had a tremendous success offering a product that is not “popular” or “sexy”, at least not anymore. They each have hundreds of competitors, but they have something that the other companies do not. They have fans, they have followers, and I believe this is the result of showing the true passion and love that they have for what they do.

        Having true passion and love means not only working hard and being persistent. It also requires being in love with your product, blogging about it, writing books about it and go to conferences and talk to people about it… startups that aren’t in love with what they do are not going to do this… and that is a competitive advantage.


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