Feature or Product or Business or Defensible Business?

Sanjay Anandaram posted a great article in Plugged.in, and I suggest that you read the full article, though to get his full perspective.  The money quote for me is:

Today I know that a feature doesn’t make a product. A product doesn’t make a business; And most importantly, a business doesn’t make a company. A company is a means of organizing a business.

People who know me know that one of the first filters I apply when looking at a company is whether the offering is a feature, product or business.  It is the talent of management and the nature of the revenue model that converts it from something that can easily copied into something that can start to be defensible.  Being defensible is key.  Why?  Well, because let’s say that you have discovered a new market that others have not yet, and a way to extract profits from that market.  What stops others from following and dominating the market you discovered?  Financial services are full of new markets being discovered and where the margins are fat enough Goldman Sachs would move it as a fast follower, and often dominate.

So, how do you stop a fast follower?  Often you cannot.  You are left with two scenarios.  Either you have a structural advantage from being first.  eBay is a great example whereby the network dominance from being first sucked out the opportunity of others to catch up.  It was not that it was eBay that allowed them to dominate – personally I feel the site was designed by a sixth grader – but by being first with a sufficiently functional product.  In Japan they were second and lost to Yahoo Japan.  Alternatively, you simply have the best execution, which can involve a decent amount of luck at the right time.  Execution is a bit like pornography – tough to define but easy to identify.

So, if you are an entrepreneur think carefully if you have a defensible business model (when you execute) or not.  If not then the profits you could make will not be yours.   If you have a product then work out how to get it to be a business and if you have a feature, well, go back to the drawing board.