April 14, 2012

Startup Succcess Step #7

Danger! You have patent protection!

There was a time when a patent meant erecting a barrier to entry for your product, with a reasonable chance of defending it against copycat idea vampires.

Those were the days. In computer technology, software, financial services and a number of other competitive environments, it is very easy for the sharks to study your patent or design patent, then modify it, improve on it and come after you.

Having a patent (a published public record, after all) gives your competition the opportunity to examine your product and processes to gain a better understanding of how to come into the market to take your lunch money. Wham bam thank you entrepreneur. Sometimes having no patent at all is a better barrier to entry.

There was a classic article in the Harvard Business Review years ago called Hustle as Strategy, drawing examples from the financial services industry, but applicable to many. It pointed out the need to improve your product or service continuously (and immediately after launch) because other people will imitate you, wiping out that “first in advantage.” Keep introducing the next variation or improvement to keep the wolves behind your sled.

The “first-in advantage,” in other words, is only as good and as durable as the quality and ferocity of the second-in players’ counterattack. For the most innovative ventures, you may have a 100 share for a period of time, but success will bring on that wolfpack. This can be your downfall – but it can also be a huge opportunity. A me-too competitor or two can often stimulate interest, giving you the chance to to keep a significant slice of a much, much bigger pie.

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