10.05.06
How to minimize impact from a market leader?
Google announced a new service called Google Code Search that is set to help programmers sift through billions of lines of computer source code using its familiar search box to uncover snippets of reusable software. This can exert fundamental impact on startups like Krugle or Koders. See more coverage on TechCrunch and Nike Cody’s blog regarding the testing they did.
To a certain degree, Google does not even have to have the same or better functionality to win. For old-timer like myself, this reminds me of a company called FTP Software in the early 90s. FTP Software used to have a decent business providing a set of foundation file transfer function before Microsoft had those in its basic window offering. When Microsoft introduced ftp and other networking functionality into its basic offering in Windows for free, FTP sales drops significantly even though Microsoft’s offering is basic and less rich in functionality. But because Microsoft’s offering is free and has brand recognition, it took away sales from a market leader quickly.
How would a startup defend itself against a landscape changing impact from a market Gorilla? Here are some of my thoughts on this, please contribute if you have more…
- Build a strong IP portfolio. The barrier into a technology market becomes smaller over time, especially on the Web 2.0 architecture. If you are building a startup, make sure you document your invention and get patents filed early. If you don’t have the money, at least get the provisional patents so that if your competitor comes into the same area, you have something in your corner to defend your turf
- Have a strong customer base that is sticky. Have a large customer base does not guarantee success. If your offering is easily replaced with a competitor’s one, then it is very risky. A good customer base is one that can not be easily replaced and switch to your competitor just because there is a new offering. ie. the customer integrated your services into its own workflow or backend.
- Different segmentation. Try to stay a little bit away from a large competitor’s core offerings and find a unique niche segmentation where you have a competitive domain advantage or cost structure that is not easily duplicated.
