Saturday, 25 March 2017

Startup lessons from 'The starfish and the spider'

I have just finished reading the book entitled 'The Starfish and the Spider' by Ori Brafman and Rod Beckstrom. I really enjoyed reading it. The book is about organisations that are fit for the future. Many of the larger companies of the past are not reactive enough to deal with the challenges that the modern business world faces. They need to change their tactics or die.

Take the music industry for example. With the advent of the internet and file sharing, music became something that users could pass on to each other. Record companies (probably showing my age here) saw their profits erode and decided to take action. They went along the traditional route of suing people fro breach of copyright. As soon as thy took down Napster, a thousand other free file sharing sites took their place. The record labels didn't have the time and resources to deal with all of this. One would be shut down and another would rise in its place. Fast forward a few years and now they make their music available for download globally. They stopped acting like what the authors would call 'a spider' and became 'a starfish.'

But what does this mean to a startup business?

Disruption is a term that is used a lot in modern business. It refers to the fact that fact that many traditional business models could or should be updated for the modern world. I write about estate agency a lot, as something I have worked in for a long time. It hasn't really embraced change for over 100 years and the traditional model is being undermined by a disruptive competition that doesn't play on their own terms. It is best seen by way of a few sentences -

Traditional estate agents have a High Street presence and sell property from this location.

They have am internet presence.

Their competition has always been another High Street agent.

They have competed on price and service.

Longstanding agents have always ben able to force newer competition away through inertia.

That is the way they have always wanted it. But recently this has changed.

Online-only estate agents have entered the market.

They have much lower overheads as they don't have to service an office.

This means they can have a much lower price.

Traditional estate agents can't match this price.

They don't know how to compete.

So they are losing market share hand over foot and don't really know how to respond. They can talk about their service, but this isn't an industry with  great history of service in the UK. They can't match the price because of their overheads. They end up stuck without a compelling argument. They are losing ground day by day.

What does this mean to a startup business?

You need to look for the right angles to compete on. If you go straight for the biggest player in your field and try to compete on price alone then they may well have the resources to blow you out of the water. Think about what you can do that the others cannot. Start there and then build your proposition on that. In the example above, the online-only estate agents could go on price as they didn't have the baggage that the traditional agents still carried from decades of trading one way. Think about how we used to buy a holiday. It was always by walking into a travel agent, but now it is almost exclusively online.

I was once told that the definition of competitive advantage is -

'Doing something that your competitors can't do, or won't do.'

and I think that this holds true. think about what you do that others don't or can't and you can see a way forward for your startup business that will flourish in the future. Please let me know if you have an questions bout any of the above. just leave a comment in the section below. Thank you!

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