Taking the leap

The best businesses and the best projects are a quantum leap above the competition. This gulf represents competitive insulation, because others can't figure out how to get up there with you.

Amazon, for example, has a leap between it and other online retailers. Sure, you might be able to mimic part of what they've got, but the gulf is so huge, it's hard to imagine displacing them any time soon.

Nike has spent billions on advertising, sponsorship, manufacturing, technology and distribution. It's a quantum leap between them and some start-up that wants to compete.

I think going for the leap is essential for creating a business for the ages, and I want to speculate that there are three ways to make it:

  1. BUY IT–you can raise a lot of money or spend a lot of the company's R&D or marketing money and just buy yourself a huge head start and this provides insulation. (This is my least favorite, because spending like a drunken sailor often leads to other drunken behaviors, including remorse the next day).
  2. SNEAK UP THE CURVE–you can quietly develop your business fairly cheaply and then, by the time the competition notices you, it's too late. Build a Bear Workshop is a great example of this. One store at a time they built a brand, a cash flow and a nationwide footprint that makes it awfully difficult for others to compete. McDonald's did the same thing.
  3. THE NETWORK EFFECT–some markets are ready for one (and usually only one) intermediary to show up and be the default winner. Twitter and Comdex and Alexander Graham Bell are great examples of this.

There are probably some others (like make a genius innovation in your basement and then patent it) but these three are good ones to start with.