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Everyone in distribution is familiar with the idea of moats, particularly in the age of digital disruption. Back in the day, you dug a deep, wide trench around your castle, filled it with water and (at least in the popular imagination) alligators. The idea was to protect what was most strategically important to you by making it too costly for anyone to try to take it over. Because once you lost your castle, your stronghold, it was basically game over.
In business, moats refer to competitive barriers, but the essential principles are the same: protect what is most strategically important; find ways to make any attack as costly and painful as possible; make it so scary that the enemy will take a look, decide it can’t be done or isn’t worth the effort, and move on to an easier target.
But what exactly are moats in business? Where can you find them? Which ones are likely to work best? Here are a few principles to get you started.
Start with other websites. A college professor of mine used to say when he assigned a paper, “Every other writer in history is your research assistant.” What he meant was that countless people have already taken the time to figure out the information you need for the assignment, and it’s all available to you.
The same applies here. No matter how many inspired ideas you might come up with for forming competitive barriers, it’s likely that hundreds of people have already thought of it. So work smart. Spend time reviewing as many distributor websites that you can find, both inside and outside of your distribution vertical and the geographic area you’re in. Cast the net wide. A recent non-scientific MDM review of the websites of about a dozen European power transmission products distributors yielded more than 100 value-added services that are hard to digitize. You can even assign this as a project to someone in your organization to come up with a comprehensive list.
Next, talk to your customers. Once you have a list of potential moats, share them with your customers in the form of a detailed, annotated list of value-added services and find out which ones they are most interested in and why. This approach is not only a vital step in constructing an intimidating moat, it will also give insight into the way your customers think, the kind of things they value most and why. It will also send them a very clear message about the kind of business partner you want to be.
Next, it’s time for a strategic planning session to hash through all of the information you’ve gathered based on your online research and your customer feedback. Keep score by starting with 100 alligators and determining how many to award each moat on your list based on your ability to execute it and its importance to your customers. This will give you a forced ranking of moats based on the number of gators awarded and you can choose the top two or three to build into your strategic plan. Let your guiding principle be that the harder the service is to digitize, the more powerful it is for your business as a differentiator from online competitors in the long run.
You’ll end up with a plan to build crowd-sourced, customer-vetted, prioritized, digital-resistant value-added moats full of alligators. Competitors might really want to take away your castle but decide it’s easier to attack someone protected by fewer cold-blooded, irritable predators.
For a more detailed discussion of moats and competitive differentiators, view our November 2018 webcast, How Distributors Can Close the Gaps with Amazon Business.