End of the Sustainable Competitive Advantage?

Has Web 2.0 brought an end to the sustainable competitive advantage?  Look at Flickr, Delicious, even Salesforce.com (read their prospectus and  they admit to have no patents and no sustainable competitive advantage) – none of these companies has a defensible technology position. 

When I speak with savvy business people they ask: “What is 2ndSite’s sustainable competitive advantage?”  Well … we don’t have one… does that mean we cannot build a successful company and a cash cow? No.

I do NOT think Web 2.0 is the end of the sustainable competitive advantage and I think that any investor would do well to explore this criteria in their investment evaluation.  I also think a sustainable competitive advantage is not be all and end all.  Today you can scale a business faster and more cost effectively than ever before (online at least).  First mover advantages exist in many categories for many businesses.  Therefore you can establish a sustainable advantage through scale if you invest in the right opportunity at the right time.

Things are changing for investors and VCs.  Read Paul Graham’s “The VC Squeeze”  for some ideas on how VC’s may need to change to keep up with the times.  I think that sustainable advantages and new ways that look at the issue of sustainable advantages are going to be industry “personal” growth issues for the venture capital community – at least into the foreseeable future. 

There are going to be more opportunities surfacing that leverage sustainable competitive advantages in the Web 2.0 space.  I just hope it is not only Google, Yahoo!, Microsoft, and other monoliths that secure them.  Here is a great post by Dion Hinchcliffe on that subject.  In the comments he and I get into it a little.  It might be worth having a look at.

The final word: if you find someone who believes the sustainable competitive advantage is dead, you’ll know we’re in a bubble.

One thought on “End of the Sustainable Competitive Advantage?

  1. “Great post Michael. The definition of Sustainable Competitive Advantage will have to change with Web 2.0. e.g. in the old days it was "proprietary software" that got the VC's excited. It's now "open software" that gets the smarter VC's drooling.As Paul's post pointed out, however, quite often the VC money is just not needed.Cheers,Peter”

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