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Startup Competitive Advantages that Work

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Re: Startup Competitive Advantages that Work

#21

Post by rgr23 »

ntoshev wrote: post #17

The founders he admires (Gates&Allen, Jobs&Wozniak, Page&Brin) probably wouldn't be able to articulate competitive advantages that this guy considers "real". They didn't have insider info or authority. They were passionate about what they are doing, but who knows if they were more passionate than their competitors (also applying this point to Apple for design and Google for search is not correct; Apple sacrifices ver…

Same goes for the founders of Facebook, Twitter, Amazon, Craigslist, Ebay, Yahoo, etc.

Re: Startup Competitive Advantages that Work

#22

Post by mkuhn »

arturadib wrote: post #11

I still think that the best predictors for success are variables that characterize the founders (smarts, perseverance, adaptability, etc), rather than their initial ideas or pitches. People like to dissect ideas and pitches because that's a lot easier to do than assess the competence of the founders. (Via for example, recommendation letters, but that's a whole new topic). Try doing this: Read "Founders at Work" or so…

What you are describing is called Upper Echelon Theory or the Upper Echelon Perspective which is backed up by quite a solid base of research. It basically states that a company is a reflection of its officers (or founders) and that they therefore are largely responsible for a company's successes or failures.

Upper echelon theory is one of the things used to justify the bonuses and salaries that Top Management Teams receive in today's world. Also a lot of the research into entrepreneurship in the last years has focused on the upper echelon perspective a lot and tried to establish a link between factors in the founder team and a company's success.

For my Master Thesis I myself looked into the fact if diversity in a founder team increases the likelihood of startup success. The result there have been that) diversity largely has no significant influence on the success of an internet startup, only diversity in Nationality had a significant, negative impact.

If you are interested in the topic I can dig up and post a few of the papers that I used as the base for my Thesis. Unfortunately I am not yet allowed to post my own Thesis.

Re: Startup Competitive Advantages that Work

#24

Post by paraschopra »

There are a ton of successful companies that don't fit any of the criteria (Facebook, Nike, McDonald's, etc) In fact I have to think hard to come up with companies that may have had unfair advantages.

So, while unfair advantages may work in your favor. Not having them (yet being successful) may actually be a norm.

Re: Startup Competitive Advantages that Work

#25

Post by btilly »

What is sad is to see a company with a competitive advantage fail to see it and throw it away.

I used to work at Rent.com. A key competitive advantage is that its revenue cycle is wrong. When it started its competitors all made money as soon as they referred someone. Rent.com only made money after the person was referred, leased, reported it to us, the apartment was contacted, and the apartment paid. Optimizing for this was difficult, but once Rent.com had traction none of its competitors could afford to switch models because that would open them up for apples to apples comparisons, with a company that had already been optimized, when they didn't even know how to track that data!

Then Rent.com got a new, well-funded, competitor called MyNewPlace.com with deep industry connections. Same model. Some people there used to be at Rent.com. Absolutely no idea how to implement. This is where Rent.com should have increased their spend on advertising to the point where the unoptimized upstart was losing money on every sale and Rent.com was making money. Wait until the competitor went under. Then cut back on advertising.

Unfortunately Rent.com had been purchased by eBay, eBay didn't understand Rent.com's business model, and so Rent.com was forced to squeeze margins. This gave MyNewPlace all the time in the world to figure out the business model. Worse yet, Rent.com put someone in charge of internet advertising who completely didn't understand affiliate relationships (even at break-even they are profitable because of positive SEO), and that self-inflicted wound only helped MyNewPlace more.

It was a great competitive advantage. No competitor should have been allowed to flourish. But if you don't understand your competitive advantage, it is easy to throw it away. And they did.

Re: Startup Competitive Advantages that Work

#27

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Re: Startup Competitive Advantages that Work

#29

Post by gojomo »

mkuhn wrote: post #22
arturadib wrote: post #11

I still think that the best predictors for success are variables that characterize the founders (smarts, perseverance, adaptability, etc), rather than their initial ideas or pitches. People like to dissect ideas and pitches because that's a lot easier to do than assess the competence of the founders. (Via for example, recommendation letters, but that's a whole new topic). Try doing this: Read "Founders at Work" or so…

What you are describing is called Upper Echelon Theory or the Upper Echelon Perspective which is backed up by quite a solid base of research. It basically states that a company is a reflection of its officers (or founders) and that they therefore are largely responsible for a company's successes or failures. Upper echelon theory is one of the things used to justify the bonuses and salaries that Top Management Teams r…

What kinds of diversity did you look into? Did you find any factors in founding teams correlated with success?

Re: Startup Competitive Advantages that Work

#30

Post by patio11 »

btilly wrote: post #25

What is sad is to see a company with a competitive advantage fail to see it and throw it away. I used to work at Rent.com. A key competitive advantage is that its revenue cycle is wrong. When it started its competitors all made money as soon as they referred someone. Rent.com only made money after the person was referred, leased, reported it to us, the apartment was contacted, and the apartment paid. Optimizing for t…

even at break-even [affiliates] are profitable because of positive SEO

Not necessarily true in all cases, but broadly accurate. Also, you can work the backend. (Solicit upgrades, upsells, and repeat purchases from the customer, which would typically not result in you paying additional commissions to the affiliate.)

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