No, that is not a competitive advantage

http://blog.asmartbear.com/not-competitive-advantage.html

by gthank • 16 years ago

166 107 16 years ago

blog.asmartbear.com

AlexBlom• 16 years ago

In anything other than tech many of these can be considered a competitive advantage. That's where the lines get blurred. I wonder how many applicants were recent grads without fully understanding the industry.

davidw2• 16 years ago

I'm curious to see how his view of things fits in with the 37 signals "just do less" view. What is their unfair competitive advantage? Or do they think you don't need one?

webwright5• 16 years ago

Their competitive advantage was that they had a pretty huge and passionate following (between SvN and DHH being the face of RoR) before they ever launched their first product. Not dissimilar to Joel Spolsky and the Coding Horror guy launching StackOverflow to instant success (but largely fail to see great success with non-geek-oriented StackOverflow sites).

If you can be charismatic enough to collect a bunch of evangelists (among the people who talk and link most on the web) and then build a pretty good product that is designed for that audience, you'll succeed. I think 37s stuff and StackOverflow are pretty good, by the way.

Doing less is NOT a competitive advantage (as evidenced by the army of 37s copycats who realize that not many companies can get away with zero sales/marketing).

davidw2• 16 years ago

I haven't read it yet: do they cover that in their book, Rework?

boundlessdreamz• 16 years ago

Rails was released after basecamp from which it was extracted. Basecamp was launched in Feb 2004 and Rails in July 2004 http://37signals.com/svn/archives/000542.php http://rubyonrails.org/core

slantyyz2• 16 years ago

With respect to Stack Overflow, I think they were an instant success largely because they are infinitely less douchey than their competitors, who put up barriers and paywalls to see answers.

dminor3• 16 years ago

You don't need a competitive advantage to succeed. They can help, but you can also just take a good idea and execute well on implementation and marketing.

fookyong3• 16 years ago

"We have a gigantic amount of funding"

and

"We have a gigantic amount of domain knowledge"

are two "true" competitive advantages.

one allows you to out-market the competition, the other allows you to out-think them.

webwright5• 16 years ago

Knowledge doesn't allow anyone to out-think anyone. Who has more domain knowledge in mobile 3 years ago-- Motorola or Apple? Most of the successful founders I can think of didn't know much about their space before they jumped into it.

fookyong3• 16 years ago

good point, but then I could counter-argue that Apple had more domain knowledge in the area of building and marketing consumer electronics that people love :)

depends where you see the domain as being.

Gormo2• 16 years ago

In fact, deep knowledge can often be an encumbrance if it reinforces assumptions that may not be exclusively true or prevents you from visualizing viable alternatives.

HilbertSpace14• 16 years ago

"Knowledge doesn't allow anyone to out-think anyone."

Tell that to the pilots in the Gulf War who few F-117s over Baghdad with the sky lit with flak and without any plane getting even a scratch. Then tell this to the people where the bombs fell or the people shooting the flak. Tell this to the Japanese military in 1945.

Can there be any such examples in information technology entrepreneurship now? Hmm ....

btilly2• 16 years ago

To the contrary, a gigantic amount of funding is a millstone around your neck.

Frequently you have to pivot and head in an unexpected direction as you discover what the market really is. If you have a lot of funding, then you are unable to pivot in any direction that doesn't offer a fairly near term prospect of making enough money to justify your funding. It is even worse if the funding comes from a source that has the classic VC "strike for the fences" mentality - because they will insist on handsome returns on investment rather than just making their money back.

For a detailed explanation of the dynamics by which over funding prevents success, I highly recommend reading The Innovator's Solution. It is written in the context of an existing company doing a spin-off, but it applies in spades to startups as well.

fookyong3• 16 years ago

that's the "build it and they will come" approach. sorry, the real world doesn't work like that for 99% of companies.

you will get further with an average product and a shit-ton of money to spend on marketing, than having a great product and zero money to spend on marketing.

we like to hear stories about the latter, and it does happen, but those companies are outliers. you can't bank on it happening.

bottom line is, it costs money to acquire customers. if you want more customers than your competition, a safe starting point is having tons more cash than them.

adamilardi4• 16 years ago

We have three PhDs / MBAs. Can certainly be an advantage. People who come from the best school's will probably have a much easier time raising money than a company of college grads from run of the mill universities.

dgabriel• 16 years ago

>best school's

Maybe.

adamilardi4• 16 years ago

Were you making a snarky comment about my grammatical error or where you agreeing with me? ... maybe

cwp• 16 years ago

Well, graduate degrees can be helpful, but it's not a competitive advantage. You competition can hire people with degrees too. The more helpful they are in your field, the more likely it is that the competition will have them too.

adamilardi4• 16 years ago

talent is always a competitive advantage.

nailer• 16 years ago

> Innovative design and intellectual property are no longer long-term competitive advantages.

Really? Google and Apple don't get advantage from their great design and engineering talent?

> You live in the era where the most powerful programming frameworks and tools are free, local broadband and high-availability servers are cheap, and world-class people are willing to work 60 hours/week in exchange for Ramen noodles and the chance to be a part of a cool new startup.

Yes, but tools are tools. Most people still make shit with them.

noverloop• 16 years ago

It's not a sustainable business strategy to assume the competition is not going to catch up

ccollins• 16 years ago

You're right, but that is neither Google nor Apple's strategy. A winning strategy is to hire and cultivate the best {engineers, designers, leaders, etc.} - if you get the best, then by definition the competition cannot catch up.

rythie3• 16 years ago

Apple's unfair advantage is a massive base of loyal fans who will follow every move Apple makes, track the SteveNote live and buy the products on pre-order (and pay a high price for them).

Other companies release products of a similar quality to Apple and don't get anywhere near the press coverage or sales.

JoeAltmaier2• 16 years ago

Apple's advantage is marketing to people who respond to their message, thus CREATING loyal fans.

lsc• 16 years ago

do you remember the 90s?

man, everyone thought apple was stupid. something you'd only use if you got it for free.

I mean, the same complaints were voiced then as now (e.g. it's essentially a closed hardware platform) but unlike now, they didn't have the upside. They weren't "cool"

At the time, most people had used apples because apple gave computers away to schools. Really, I think it was a bad strategy, because we all came away with the idea that apples were slow, outdated, broken garbage which couldn't run anything more interesting than 'Oregon trail'

so, uh, yeah. I'm personally still not a fan of apple. but I can certainly say they didn't always have the masses of loyal fans they have now. (I mean, they had fans, but they were few, and generally looked upon with the pity one has for BeOS or Ameiga fans.) This large and "cool" apple fandom is actually a pretty recent development. Now, i'm way out of touch, and most of the people I meet are *NIX users, so I wouldn't really know, but as far as I can tell, it really started with the advent of OS-x.

edit: as others point out, my point of view is probably a little different... as I'm a technical person, and apple did not really start appealing to the technical crowd until os-X.

jodrellblank2• 16 years ago

Unless you're suggesting that any company named "Apple" would have those fans ... in what sense is a massive base of loyal fans an unfair advantage?

They (we) are loyal fans for good reason.

slantyyz2• 16 years ago

I would say that Google and Apple are successful because they execute well. Many talented people have tried to copy their designs and features but few have been able to execute those designs and features as well as them.

Goladus• 16 years ago

Apple's innovative design is a short-term competitive advantage. If they did not have anything else going for them, android competitors would tear them apart. The thing with apple is that they continue to innovate (and market) successfully time and time again. That's the secret that other's can't seem to figure out.

mkramlich• 16 years ago

One of Apple's strengths I think is that they have the resources of a large company and yet do a decent job at moving & pivoting like a small company. They're at a point lately where they seem to release some major new cool thing each year that makes consumers drool and their competitors tremble or at least scramble to catchup.

The flipside is that if they feel too much pressure to keep moving fast they might move too fast and then the quality drops and they stumble (as possibly evidenced by the recent iPhone 4 signal issue.)

smartbear2• 16 years ago

I don't completely disagree, but wouldn't you agree that for every company so amazing at design as Apple and Google there are 100 or 1000 who are successful for other reasons? And therefore just saying "better design" is not IN GENERAL something you can compete on?

Furthermore, wouldn't you also agree those two companies also have a tremendous quantity of innovation, and never take the gas off innovation, to an extend probably not feasible or necessary with other companies?

I would agree with you that if you have the design talent of Apple, plus the output of Apple, plus the marketing success of Apple, that this is of course a wonderful advantage.

But that's rare... maybe other paths to success are more practical for many founders out there.

arturadib2• 16 years ago

Although I agree that adding a new feature is not enough to make a product stand out, there is one case where a new feature can mean everything: When the product is designed entirely around it.

Case in point: Posterous. As discussed more extensively by Dustin Curtis (link below), their novel feature was to allow blog posts by email. Any existing blogging platform could have added this feature. But Posterous is different; the product is posting-by-email.

I think something similar can be said about Twitter. Again, any social networking site could have added the option to send short text messages to their already large user base. Facebook in a sense encompassed Twitter with its News Feed.

But again, Twitter is different; short text messages are the product.

http://blog.dustincurtis.com/i-dont-laugh-at-startup-ideas-a...

dminor3• 16 years ago

Feature X isn't a competitive advantage if it's easily copied. Competitive advantages are things that others cannot attain or cannot attain without great difficulty.

gthank• 16 years ago

If I could upvote you a hundred times, I would. Almost every comment disagreeing with the article fails to understand the economic definition of "competitive advantage." He didn't say none of those things was an advantage, he said it wasn't a competitive advantage.

arturadib2• 16 years ago

I guess you didn't get my point.

If the feature is the product, then the only way someone else can copy your feature is by redesigning their entire product. That's a huge barrier of (re)entry for existing competitors, and hence a competitive advantage.

If you're worried about newcomers, there isn't much you can do to argue for competitive advantage anyway. Most software ideas can easily be copied no matter what.

Except perhaps when the idea targets highly specialized markets and your team already has experts in the topic, and only a few such experts exist in the world. E.g. high-frequency trading platforms, etc.

But in most software startups, that's hardly the case.

edw519• 16 years ago

This reminds me of my favorite quote from my favorite business book, Differentiate or Die by Jack Trout, with emphasis on "Anything that others could claim just as well as you can, eliminate.":

The best way to really enter minds that hate complexity and confusion is to oversimplify your message. The lesson here is not to try to tell your entire story. Just focus on one powerful differentiating idea and drive it into the mind. That sudden hunch, that creative leap of the mind that "sees" in a flash how to solve a problem in a simple way, is something quite different from general intelligence. If there's any trick to finding that simple set of words, it's one of being ruthless about how you edit the story you want to tell. Anything that others could claim just as well as you can, eliminate. Anything that requires a complex analysis to prove, forget. Anything that doesn't fit with your customers' perceptions, avoid.

http://www.amazon.com/Differentiate-Die-Survival-Killer-Comp...

rmah• 16 years ago

Well, it's fine that the author gives many examples of what he feels are not advantages. But he doesn't give a single example of what he feels are solid competitive advantages. Left me feeling disappointed.

tbrownaw2• 16 years ago

P.S. Next week I'll talk about what are real competitive advantages.

Which I suppose makes sense, as it's supposed to be part of a series.

10ren3• 16 years ago

And eager to stay tuned for next week's exciting installment!

greenlblue2• 16 years ago

Is there any particular reason he is doing this in a teaser trailer kind of approach? "Next week's episode is the real episode you want to watch?"

jodrellblank2• 16 years ago

Maybe ability to make you commit now to reading his next blog post is a competetive advantage?

greenlblue2• 16 years ago

Well his approach annoyed me so I'm gonna stay away and not worry about what he has to say. Whatever he says will permeate through the internet quickly enough so keeping people waiting till next week is not really a competitive advantage.

F_J_H2• 16 years ago

I've always thought this was a great quote:

"Here is what the success of everything depends...on seeing things in a way which afterwards proves to be true, even though it cannot be established at the moment..." Joseph A. Schumpeter, Economist

With everyone having access to mostly the same information and the same tools, it is the person who sees possibilities where others do not who is able to start something successful.

Gormo2• 16 years ago

Isn't there a bit of a chicken-or-egg problem there?

Perhaps your forward-thinking vision turns out to be true precisely because you were successful in implementing it.

If I'm trying to scale what works in the immediate here-and-now into something that is sustainable in the long term, I'd prefer to be able to adapt my vision to changing circumstances, rather than stick with a single, consistent viewpoint in the hope that it later proves to be "true".

johnrob• 16 years ago

I'd say less of a chicken-or-egg, and more about making yourself available for luck. Founders and investors all have their opinions of what will or will not work. Nobody really knows though. And if the founders can get what it takes to build and push a product, the beauty is that everyone gets to find out. You might get lucky and have a hit, and you might not. But without building anything, you don't get the chance to be lucky.

I'm not saying that success is solely due to luck. A smart startup will continually make itself available to luck by iterating the product and not giving up. If it's willing to do this indefinitely, success is almost a guarantee.

HilbertSpace14• 16 years ago

"With everyone having access to mostly the same information and the same tools,"

Not even NEARLY true.

F_J_H2• 16 years ago

From the article:

You live in the era of the flat world where millions of people have access to technology, education, and a powerful sales, marketing, and communication platform (the Internet).

You live in the era where the most powerful programming frameworks and tools are free, local broadband and high-availability servers are cheap, and world-class people are willing to work 60 hours/week in exchange for Ramen noodles and the chance to be a part of a cool new startup.

avdempsey• 16 years ago

Agreed! Some of the biggest successes have this in common: they've gotten away with something that wasn't obviously possible/legal. Microsoft: you can make people pay for software. Google: you can index the web (and all online information).

chc2• 16 years ago

How were either of those likely to be seen as impossible or illegal? Both commercial software and search engines were existing fields — heck, search was actually considered a mature field and the existing search engines had started branching out in other directions.

JoeAltmaier2• 16 years ago

Building a Better Mousetrap has been considered a business plan for a century. So its not a competitive advantage? How about timing, marketing, message? Those sunk Beta.

10ren3• 16 years ago

real competitive advantages:

(1). New technology that you have developed secretly and roadmapped into the future (so that as your previous release is copied, you are ready to release the next one). Of course, those developments must also be needed by customers (eg. enhance an attribute that they care about; meaning that the initial release was lacking in this aspect, yet it still had some core value that made it worth buying). It's a bit like having your own private giant upon whose shoulders to stand. Because you've done the experiments, you've seen more. You do more experiments, and see more again. This is keeping ahead of the engineering curve, and so it's a supply-side advantage.

(2). Customers that have developed a habit of using your product, especially if they have changed their behaviour in order to adopt it (they might have done so because you were the only one to offer the technology, and then being the one with the best technology - due to point 1). This is related to switching costs. Demand side.

(3). Related to point 2 is when you not just have customers, but you are recognized as the leader, because you have dominant market share (here's where it's an advantage to focus on a niche: it's easier to dominate a small pond that a big one). Psychologically, people like winners. It also means that you win all sorts of races, where people have to make a choice: third-parties choose to support you; big companies choose to standardize on you; users choose to train for your product. Demand side.

(4). Network effects! Again with the customers, but here, because of interaction between customers, the value of the product is proportional to the square of the number of customers. This makes it harder to stop you, but you first need to be ahead - so it's more of a multiplier than a CA in itself. Demand side.

(5). Feedback. Once you have customers, you get feedback from them, and you can improve. If you can get this feedback before your competitors (eg. by launching before them), it can help you keep ahead. It's a kind of secret information, as you learn about what the market really wants; and it's also specialized to your product. In these senses, it is proprietary (owned by you). Another private giant. Supply side.

(6). Revenue. Once you have money coming in, it's a kind of magic, because you can reinvest and grow. Smaller competitors can't match this (assuming you can spend the money in ways that make a difference - like advertising - but it can be surprisingly difficult to find such ways...) And even large companies don't want to bother competing with you, once you really get going (they might buy you though). Supply side.

(7). Although particular skills can help, there's always someone smarter, more experienced etc. However, I like to think that a particular combination of skills can approach a hard-to-replicate advantage (though of course it has to make a difference to the start up. It's no good being an art-expert + TCL programmer unless that's somehow needed).

(8). There are also milder ones like good PR (a kind of advertising), being attractive to talented workers (which in turn increase your success), being inspirational (more advertising).

I agree about patents. They're a good piece of paper as a bargaining chip in acquisitions.

Now, the difficult thing for me is to apply these abstract ideas to my own actual startup (it's easier to be wise when you're not involved). They all seem to point to agility and getting your product out there now. Scary.

fjabre• 16 years ago

Loved 1 and 7.

You can copy a product's feature set but you can't copy its soul which are a combination of vision and team dynamic IMHO.

cookiecaper• 16 years ago

This is nice but almost all of these depend on an already existing product with a significant userbase. My presumption is that most people applying for YC or similar seed-stage groups don't have an existing product. So that makes addicted customers, revenue, etc. irrelevant in this context.

I am looking forward to seeing what the author considers "competitive advantages". The only one I can think of is the team behind it. That's all you have when you're starting out anyway.

10ren3• 16 years ago

reality can be inconvenient. Why not accept the challenge of guessing what the author will say (eg. by researching on wikipedia or Porter's competitive advantage)? It's one of the most effective learning strategies - get it right or wrong, you won't forget.

One approach is to not expect to have customer-based competitive advantage at the start, but have a plan of how to get there. Eg. a product that has network effects + a plan for how to get there.

I think the idea of enduring or sustainable competitive advantage is a bit misleading, because things always change, so competitive advantage is dynamic. It can be more helpful to in terms of the duration of a competitive advantage. For example, when you start off with an easy-to-copy product that is in demand, you do have a competitive advantage - it's just that it doesn't last long. But you can use that brief period to build the next competitive advantage. (in rock climbing, a dynamic move is when you are not statically supported, but rely on your momentum to reach a stable point).

d0m• 16 years ago

Depending of the feature, copying it takes time. And while your competitor is copying it, you're working on the next version of your product with others new innovative features. So, I disagree with a fact that a feature is not a competitive advantage. I.e. google with their first smart way to crawl the web was a huge advantage. This advantage may not be there forever, however, it IS an advantage.

Silhouette• 16 years ago

The basic premise behind the first point, "We have feature X", seems to be that someone could do the same thing better than you. Well, of course they could.

But the thing is, you've already done it. While some hypothetical competitor is trying to catch up to you by copying your existing feature and perhaps making incremental improvements with the advantage of hindsight, you don't need to stand still. You can already be building the next generation of newer and better things. You have exactly the same "public" hindsight to draw on in doing so, and you also have whatever beneficial experience your team accumulated from having done it once already. For any software project or anything with a significant user interface component, that experience can be worth a fortune.

So while "We have feature X" may not be a competitive advantage, "We have feature X NOW" certainly is, assuming feature X is something the market wants and you've done it well enough for the market to buy your product.

It's surprising to me that the author of the blog post, who sounds like someone involved in funding start-ups, doesn't seem to have got the memo about ideas being cheap and good executions being the valuable thing, nor to acknowledge any possible first-mover advantage if you have an important feature before anyone else.

smartbear2• 16 years ago

I agree with you that having a feature is useful now, which is why I specifically wrote in the article that it "isn't a long-term advantage."

Typically the "first-mover" advantage is one of marketing, not features. That is, you get a bunch of attention and hooked users so others have to compare with you and steal customers instead of having a green field.

Just having a "Feature" first can still be an advantage too, e.g. Apple's retinal display, but I still feel this isn't enough.

Also agreed that if you CONTINUALLY produce amazing unique features -- like Apple -- THAT is a competitive advantage, but just having one isn't.

ThomPete• 16 years ago

Whether and how features matter is a pretty fuzzy field.

One thing is certain though, features and success is not by any metrics in a one to one relationship with each other.

adnam2• 16 years ago

I thought the real meaning of "competitive advantage" was simply having profits greater than the average in your sector.

adnam2• 16 years ago

http://www.quickmba.com/strategy/competitive-advantage/

parallax7d• 16 years ago

Advantages is determined by the existing competition.

If they aren't innovative, and you are, it's a competitive advantage.

Same goes for anything in your business model that you can do better than the existing competition.

Worrying about newcomers is a good idea, but pretending that your magical zord of power will give you a permanent advantage over people and companies that don't exist yet is largely pointless.

bsnss-mn-cdr• 16 years ago

While I do believe there are genuine cases where a new company does have a 'competitive advantage' most do not. At the end of the day the only advantage a company should strive for is how to use their skill, resources and relationships to make more money than their competitors. MySpace was on a great growth path before a lot of people even knew what Facebook even was. They had more financial resources sooner than Facebook and had a lot of ‘cool’ corporate sponsors to provide brand equity before Facebook. At the end of the day what they did just felt better to more and more users and what MySpace didn't do made it an easy case to switch. It is not that MySpace could not replicate the features of Facebook it was the fact MySpace didn't.

HilbertSpace14• 16 years ago

"80% of Americans believe they are better-than-average drivers. Can't be true, right?"

No, not "right".

For any finite (> 1) set of people on nearly any measure, it is easy for all but one to be "better than average".

E.g., for any positive integer n > 1, everyone gets a 1 except the one person with a 0 so that the average is (n - 1)/n < 1.

Done.

alextp2• 16 years ago

Yes, abstractly, of course. On the other hand, this sort of distribution is usually gaussian (a whole bunch of average drivers, and a few specially good and bad ones), and it is true that 80% of the people can't be above average if they are samples from a well-behaved distribution (with controlled skewness, and in the correct scale, etc)

HilbertSpace14• 16 years ago

"this sort of distribution is usually gaussian".

No. That distributions are commonly Gaussian is some quasi-mystical nonsense left over from 'psychometrics' about 100 years ago.

The most common way to get a Gaussian distribution is from the central limit theorem, and it's much worse than clumsy to argue its assumptions here.

Gaussian needs MUCH more than your "a whole bunch of average drivers, and a few specially good and bad ones".

Your "well-behaved" is asking far too much for practice or reality. Gaussian isn't "well-behaved"; from Melon in 'Back to School', it's "fantasy land". E.g., there's no reason to believe that can have your "controlled skewness".

On your "scale", sure, if know the distribution and if it is absolutely continuous with respect to Lebesgue measure, then can pick a scale that maintains order and yields Gaussian. The educational testing people love to do this. It's quasi-religion. And we collect taxes to pay them for that?

Yes, for stock market data can argue that changes in price each 15 seconds are independent and identically distributed with finite mean and variance so that the central limit theorem applies so that the change in price from noon today to noon next week will be Gaussian. Of course there are traders driving Ferraris laughing at that.

Do yourself a favor: For real data, assume mean and variance exist and are finite, but without a really careful appeal the the central limit theorem dumpster Gaussian. For multivariate data, don't even think about Gaussian.

Uh, some diffusion processes in physics might give you 3D Gaussian quite accurately.

tbrownaw2• 16 years ago

Gaussians don't work very well when the typical value is near one of the bounds. For example say 3/4 of drivers don't eat, apply makeup, talk on the phone, etc, while driving, and generally pay attention to the road; that sort of attentiveness is probably most of what makes a good driver, so you'd have the majority of people being near one extreme of the possible range and get a rather one-sided distribution.

nudge2• 16 years ago

I think it's fair to assume that, in this context, people are using the 'median' sense of average rather than the 'mean' sense. When someone thinks "I am a better driver than average", this probably means "If you were to rank all drivers by skill, I would be in the top half" rather than "If you take the mean of the quantified driving skill of all drivers, my quantified driving skill is above that."

HilbertSpace14• 16 years ago

"I think it's fair to assume that, in this context, people are using the 'median' sense of average rather than the 'mean' sense."

Not "fair" at all, and not at all appropriate. Still want the average, the mean, the expectation because of the law of large numbers and the best L^2 approximation property of the mean. Besides, often in practice, e.g., for even positive integer n independent, identically distributed samples from a distribution absolutely continuous with respect to Lebesgue measure, the median is not even well defined.

The median is good for politically correct news stories about data from political economics.

furtivefelon• 16 years ago

The assumption is that like many natural phenomenons (height, weight, etc), driving skills are distributed normally, which means mean = median.

HilbertSpace14• 16 years ago

That assumption was unstated and, if stated, would be wildly unjustified.

For what was stated and assumed, my example works.

Sure, my example looks contrived and pathological, but so it commonly is with simple examples.

Your claim that height, weight, etc. are normally distributed is also wildly unjustified.

You have swallowed a common bit of old quasi-mystical nonsense from 100 years ago that real data is commonly normally distributed. That claim is nonsense.

Read what else I wrote about Gaussian distributions in this thread.

Grow up. Learn. In practice, Gaussian is rare and otherwise fantasy land.

HilbertSpace14• 16 years ago

" If you've lived in the software world for a few years you know the stuff they teach you in school is irrelevant"

Knowing how this is wildly false can be the source of an enormously valuable competitive advantage. But, keep believing such nonsense stuff, guys! I'll let you know when to change your mind!

yason• 16 years ago

The really good, grand ideas tend to be copied quickly because ideas are cheap to copy but expensive to come up with.

In software companies, I also think that a competitive advangage can only be hard, actual, time-consuming work.

Like customer service. Or making things easy for the user by doing all the smart work yourself and not leaving all the decisions to him, thus making your software "just do the right thing".

If you can afford to do such hard work then other's can't copy it except by doing the same amount of work to provide equally excellent service, and this only benefits everyone. And if they don't, it only benefits you and your customers.

alexro• 16 years ago

I'm very with you on that one, but how you gonna pitch such advantages to seed investors early on?

HilbertSpace14• 16 years ago

Look, guys, this thread and its article are making a big, gigantic, HUGE mistake.

Why? Heavily because the 'culture' here is limited almost entirely just to computer programming. Also, the business examples are limited almost entirely to Microsoft, Apple, Google, Facebook, Twitter, etc.

For software, here call that hardly more than load-store, calculate, if-then-else, do-while, allocate-free, read-write, and call-return. Okay, we are all now on the same page for 'software'.

Uh, let's get in a little info helicopter and rise up to about 10,000 feet and get a wider view. So, the view we want is of 'information technology' and its entrepreneurship.

So, for the entrepreneurship, as in Web 2.0, we want to please the users and paying customers, e.g., the advertisers. The advertisers are mostly on a monotonous diet: They want clicks. But they are cheap: They want the most clicks per ad dollar.

So, we need to please the users and get lots of clicks per ad dollar.

One way to please the users is to give them 'information' they will like.

So, in both cases, we have some data, process it with software, and get out more data that we regard as the information we want to please the users and get lots of clicks per ad dollar.

A big question is how to process that data. Or how to convert data into information. We want powerful means for doing that.

So, where do we find out how to process input data to give desired output data? I.e., where do we go for such recipes for such 'secret sauce'?

Sure, so far in computing, the processing has mostly been just intuitive heuristics or automation of what people understood well how to do in principle just manually.

Can there be more? Actually, not much from computer science: E.g., lists, queues, trees, parsing, etc., in a cooking analogy, just grind grain into flour but don't say how to make, say, a Sacher Torte.

Here is a hint from the word information: Or, as we know from Shannon, there is information theory which is really just some applied math. So, really, it's math that is the academic source of knowledge and techniques for processing input data to give desirable output data. Uh, it ain't high school math, and college calculus doesn't go very far.

What can be done with that material is far beyond what can be done intuitively or manually.

Can use this material to construct 'secret sauce' for the processing.

This secret sauce need not be at all easy to duplicate: Sure, the US National Academy of Sciences could put together a team, but nearly no one in business would or could.

So, if the secret sauce is powerful and its application valuable and is sufficiently obscure not to be easily duplicated, then it can be a "competitive advantage".

"But everyone has access to the same math". Not in any important practical sense! Might need a well designed undergrad major in pure math. What fraction of the computer programming community has that? Getting it takes ballpark four years. Then might need a few years of carefully selected graduate mathematics. Now what fraction? Some of the most important material may be rarely taught. Now what fraction? We're getting down to a convention in a phone booth, guys. Then do some original derivations. Now we can be down to one guy and the guy he sees in his mirror.

Kleiner Perkins, Sequoia, etc., write all the checks you want, but you will have a tough time finding anyone who can make sense out of this, find the right rack in the right section of a research library, read the right books and papers, and redo the original derivations, in less than years. You'll be "digging in the wrong place". The commonly claimed "deep domain knowledge" will leave you walking randomly in the stacks and getting exhausted. There can be little more discouraging than an unguided tour without prerequisites of some of the more important books and papers.

Are there lots of examples now? In business, no. Thankfully for US national security, yes: For decades, the US DoD has seen these things very clearly.

Can it work in business? Hmm ....

"But it's not the mainstream; that is, it's at most just tiny, niche stuff."

Uh, a movie starts out, "The early history of America is a tale of great first times." Well, we're still trying to have "great first times". So, don't try to copy Apple, Yahoo, Google, Facebook, etc.

Or, to see farther than others, stand on the shoulders of giants.

Fortunately, on selected shelves of the research libraries, actually can find such shoulders and no one standing on them, in that library or any others. Then can do some original derivations, translate that work to if-then-else, do-while, etc., have at low costs lots of great infrastructure software, processor cores, main memory and disk bytes, and Internet bandwidth.

What a country! What a time!

But it ain't just routine computer programming, guys.

chc2• 16 years ago

I can't really follow this. It reads like a rough transcript of a speech. I think you're trying to say that it's good to know math if you want to invent novel programs, but I can't figure out how that's apropos of anything, so I imagine there's something that I'm missing.

HilbertSpace14• 16 years ago

You've got it wrong, BADLY wrong: For "novel programs" I don't give a rat's ass.

"I can't figure out how that's apropos of anything"

It's about charging into Web 2.0, 'consumer Internet', 'information technology' entrepreneurship, and the future of computing in business, that is, exploiting cheap cores, bytes, bandwidth, and infrastructure software, and making money, $1 billion, 10 times that, maybe 100 times that, maybe from one project, much more in total, and where for this some selected work in math is the crucial key.

E.g., just sitting right in front of us is an opportunity to suck the air out of old media, and for that a key is some math.

"so I imagine there's something that I'm missing".

Yup.

I can't explain it better than I did.

In communicating any of this, there are two BIG problems:

First, there are nearly no examples in, say, 'information technology' entrepreneurship. Lacking examples, it's super tough for people to see it.

Second, the math I'm talking about is not often taught, even in the best US research universities. It's rock solid math, but it's just not very popular.

So people are missing both the examples and the math. So, the whole thing looks empty or worse.

Sorry 'bout that.

I'm telling you the truth, but I can't explain it better than I did.

If many people readily understood the work, then the business opportunity would no longer be there. A good business opportunity and difficulty understanding it are love birds.

Broadly this situation is not very surprising: Anyone talking advanced math in Web 2.0, etc. is doing 'field crossing', but that technique, say, using clipper ships to bring pepper from India to Boston, make enough in one trip to pay for the ship, has to its credit a major fraction of the best business successes.

So, bringing math to Web 2.0 is field crossing. I'm here to advise you, for the future of cheap cores, etc. in business, a major key is selected work in math; I tried to give the reasons at a high level, e.g., about 'information'. Maybe someday I will underline this point with an example. For now, that's the best I can explain.

stan_rogers• 16 years ago

Interesting problem space, but not the only valid one, nor the only one likely to give one a sustainable advantage in the commercial space. In fact, there's probably more to be made in developing a heart-friendly Sachertorte-style dessert (trademark would keep one from calling it by that name) with an icing that is as good as or better than the original and marketing it (and a cookbook full of recipes that don't include your magical icing) via a twenty-minute PHP "project".

HNe is not about the outer reaches of computing possibilities (although the subject tends to interest most of us, and if you pay attention you'll find that Shannon is familiar to at least a significant subset of the population here), it is about creating and capitalizing on value. It is about marketable innovation. Nobody is likely to win a Fields or an Abel for finding a way to make $9.95/mo from a few tens of millions of people, but whoever does it is likely to drive a much nicer car than the guy whose life's work is able to pluck useful security intelligence from a billion digitized telephone conversations a day (but, since it is classified as top secret ordnance, can never be marketed). And if you want to be realistic about it at all, anything that approaches the limits of the IR noise floor with precision, even limiting the problem space to text, is going to be so classified. The work may be the source of great personal pride, but little else. (And when the fifty-year window opens, you'll be too old for a Fields.) So much for entrepreneurship.

charlesju• 16 years ago

The real question is what successful startups would fall into this guy's criteria. Then the follow-up, which successful startups wouldn't fall into this guy's criteria.

snowbird122• 16 years ago

We should all really be thinking in terms of sustainable competitive advantages. Serious question: How can a startup software company create a sustainable competitive advantage?

andrewtj• 16 years ago

For a hosted service in a mature market would an open source core be considered an advantage, disadvantage or irrelevant?

Murkin• 16 years ago

"I am very lucky"

Might not look like a great competitive advantage, but looking back, is a major advantage of many a successful startup. Might as well put it in...

No, that is not a competitive advantage

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