I’m Building A Moat. Are You?
In this weekly series, I opine on how words affect the way we understand the products and services around us. I do this for your entertainment and education (and, of course, to remind you that if you’re looking for a freelance copy, content, product, or technical writer… yada yada, hire me.
When I was young, my cousins and I oft played games of our own invention. These became staples of family holidays, and among the most memorable was “Leechers”.
The titular “Leechers” were an evil insectoid army that was perpetually trying to attack us in a bloodthirsty quest for our prized rations (white pizza and pizelle). As a team playing cooperatively, we’d scrounge up what we could in the house to build a base from within which we’d defend against the imagined assault.
Deciding how to build our fortifications strategically became the great joy of the game. We would dream up all sorts of creative uses for the couch cushions, coffee tables, and chairs around. We’d even build elaborate traps for these imaginary interlopers: blue-blanket moats abound.
You might then, as I do, find it fitting and ironic that even now I spend so much of my time still thinking about how to build a better moat.
Wait, What Are We Talking About?
Among the most important strategic considerations when trying to build a company or product is its “moat”.
Medieval castles were often enclosed by moats to defend against attackers. Crossing a moat would slow encroaching soldiers down enough for archers on the walls to pick them off more easily.
Warren Buffet is oft attributed as the most prominent drawer of said analogy to the world of business. In choosing investments, he looks for an “economic moat”, which is described as a business’ “competitive advantages [that can] protect its long-term profits and market share from competing firms”.
There are many popular examples of strong economic moats in massive companies (such as McDonald’s food buying power, Apple’s immense supply chain and Amazon’s astronomical operational infrastructure). Of course, when you’re that massive, your size and scale is moat enough alone.
Yet, even for the tiniest of start-ups, I would argue that deliberately planning or building a moat from day one can be the deciding factor in whether you ever get that massive.
One pertinent present-day example of note is the rise of the machine learning start-ups who are beginning to take the business world by storm — each with its own exemplary moat in the making.
Generally speaking, machine learning systems become more effective over time. And even in the very SalesForce-clad CRM space, a new wave of disruption looms on the back of this new approach.
Fledgling players like Nudge.ai and Introhive have launched increasingly-popular tools that are built atop machine learning systems which, over time, will become harder to displace as the machines learn.
If these start-ups are successful building out a repeatable sales process while continuing to improve the underlying learning models, their learning data will become an incredibly effective moat.
Yet, moats need not be technical or product-related: they simply need to be hard to replicate and overcome.
FreshBooks’ customer support strategy, for example, is a great example of a well-conceived moat that has nothing to do with product.
Not only does the company have a large support staff to which affords great latitude in pleasing customers, but every single new employee spends the entire first month building empathy and helping customers by answering phone calls and emails. Plus, its’ support systems, SLAs, and office hours are specifically designed to ensure every customer call is answered by a human well before 4 rings.
From the outset, the company invested significantly in support, and as a result it has developed a powerful reputation — one that every single new competitor (and even established incumbents) needs to rival in order to attract or retain customers that FreshBooks could otherwise serve.
As a result, many choose FreshBooks for its support alone — even when there are countless competitive products across the price-to-potency spectrum.
I may be a touch biased, but the effect of its moat speaks for itself. Many of the 10 million people who’ve used FreshBooks since the company launched more than a decade ago have great things to say about the company, and its growth and success reflect that.
So how do you build your own moat? There’s no simple answer, but I’m trying something specific with my own freelance business.
I’ve established a client policy that I’m deliberately enforcing during pre-sales as part of my moat. I never take on a client that won’t provide recurring business, even if that recurring business isn’t particularly lucrative.
How does that help my build a moat, you ask? You’re probably thinking that sounds more like a matter of cash flow and time management. And while those are indeed ancillary benefits, the main reason I’m taking this approach is so that I can develop a deep understanding of my client’s businesses.
As I work entirely with established businesses, I’ve learned over the last 10 years that businesses working with freelancers often have a difficult hurdle to overcome. By taking work outside, these businesses run the risk of hiring contractors who don’t know their product or their people or their prospects well enough to represent the company successfully — and who don’t necessarily care enough to develop that understanding and empathy.
Many businesses, then, use freelancers only as gap-fills until they can hire full-time staff or for lesser tasks which aren’t as strategic.
Thus, by having fewer clients but going deeper with those that I do have, I create a win-win situation for both parties:
- I become a more efficient freelancer by developing better context and a deeper understanding of their goals, their products, and their pains, which allows me to produce better, faster, and frequently
- They begin to get more ROI for their investment on freelancing and can keep less employee cost on their books without losing any of the dependability and deep contextual awareness.
This understanding — a direct result of the policy — is an effective moat. A new freelancer would have to get up to speed and build the same deep understanding and commitment to the business I have in order to win it.
It’s not a radically sophisticated strategy by any stretch, but by being aware of the need to build a moat, I force myself to be more deliberate and strategic in the way I run my business, which will increase long-term chance of success.
Building a moat that competitors can’t easily cross should be an important part of your business strategy.
If you’re building product, be aware that you need more than just a novel user experience and a whiz-bang UI to last. If you’re delivering a service, understand where to spend your time in order to keep that customer in the future.
What about you? Agree? Disagree? Respond away. And if you’d like to learn more about me or my business, visit http://www.frankcaron.com.