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How to compete with the ‘big boys’ in business by creating barriers to entry

In the last few years, I have been asked many times by clients the same question: “How can we compete with a large company?” My answer to them is always the same: Learn what they’re doing and change your strategy to look more like theirs.

I believe that one of the most important tactics that the “big boys” are using is something all companies can and should do… and it can bring huge impacts for you and your business!

If you want to compete with the “big boys”, you’ll need to learn from them — use your patent portfolio as barriers to entry.

Creating barriers to entry equals OPPORTUNITY!
S&P 500 companies are successful because they have created barriers that make it very difficult for other players in the same business or market to break through, let alone surpass. They are often leading in sheer sales volumes, have locked down supply chains and kept pricing low, or are delivering an unparalleled solution that has created strong brand fans and loyal clients. There are some industry examples where the competition between the top corporations is fierce, such as Apple and Samsung. Each company is trying to develop a game changer in order to disrupt the market and retain those customers, and their status as the industry leader.

Note that a large corporation will never retain its top spot with only a single barrier to entry. They know that the more barriers they create, the stronger hold they have on the market. If you want to play with the “big boys,” you need to be sure that you have created barriers to entry that will truly protect and strengthen your business. Are you sure that you have done that?

Barriers to entry are sometimes common across businesses in the same industry. Most of the large corporations have many similar barriers to entry, such as economies of scale, controlled distribution, product differentiation, reputation, brand loyalty, pricing, marketing and more. The name of the game is to innovate or perish.

To differentiate their barrier to entry from a competitor’s, the large corporations must compete in areas that can be protected beyond business execution. One such area is research and development (R&D). The R&D and patents are used to block the competition by creating key IP that protects a use case or is adopted by standards.

Without going into the details on how this can be done, we clearly know that when a company has the IP that everyone else needs and/or is looking for, then that company has huge value in the business beyond what it is that they sell. A smartly developed patent portfolio will protect your business by being a strong barrier to entry.

“In business, I look for economic castles protected by unbreachable ‘moats’.”
 — Warren Buffett

Have you created true barriers to entry for your competitors?
In my experience, innovators and founders are so focused on getting their idea funded and their product to market that they don’t focus on these questions soon enough. Challenge yourself to really look at this. What barriers to entry have you created for your competitors, and how effective do you think they really are for protecting and growing your business in your industry?

Whether you have consciously created barriers to entry or not, in such a rapidly changing and evolving world, you may be running out of time to protect and grow your business. There is no better time than now to evaluate how well you have truly protected yourself, and what your options are for doing so.

How do you develop a patent portfolio that will serve as a barrier to entry? First, figure out what the true value proposition is that your products are aiming to solve for. This foundational step will allow you to develop an incredible barrier to entry via a patent portfolio. Your aim will be to protect the overall use case, rather than individual designs.

Take some time to truly ponder what use case(s) your products support, and how well they can be protected through patents. The answers that you discover may surprise you. What is actually protectable? What aspects of your business would be difficult or impossible to copy or circumvent? Think beyond just the technology, because it may not necessarily be the technology that you are creating that will be the strongest protector in your patent army.

To me, the most important thing is to build a patent strategy based on the overall business strategy, with a clear understanding of the overall value proposition the business is striving for. If your focus has been on patenting your technology as soon as possible, consider changing your game and protecting your business first and technology second.

High-value patent portfolios don’t just happen. They take a broad range of experts, creativity and a strategic mindset to achieve the big returns that you are hoping to accomplish. Start early. Involve experts. Protect the use case, not just the technology. And stay current… we live in very dynamic times and you don’t want to be left behind!