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Barriers to Entry Will Be Breached

Barriers to Entry Will Be Breached

This weekend I read Amanda Foreman’s fine article in the Wall Street Journalentitled, “Why Walls Rarely Keep Enemies Out.

From U.S. Federal government firewalls to the Great Wall of China, from ancient Rome to the unassailable crenelated walls of Troy, Ms. Foreman describes how insurmountable barriers are usually surmounted, often with clever and surprising ease - think about the Trojan Horse and recent theft of government information.

Siege of Lachish

Sleep Better, Yet Be Alert

The concept of false expectations, regarding protective walls, applies to business “barriers to entry.” Business barriers, designed to prevent competitors from entering your market or model, are expensive to build, provide a false sense of confidence, and are breached in drawn out battles that drain resources and yield disappointing outcomes.  These barrier are frequently rendered useless by new technologies, alternative stratagem, or simply choosing an unanticipated point of entry.

The best companies often take a different strategy; they leapfrog beyond their own hard-earned well-fortified castles to build greater palaces on higher plains.  

Barnes & Noble:  Conquerer & Competitor

Barnes & Noble stormed local and regional booksellers. Border’s Books and B. Dalton, among others, were taken by surprise with a mass-market, discounted-price, and efficient supply chain strategy that disrupted not only their regional models, but also an entire multi-billion industry.  With over 1000 points of sale and low margins B&N built barriers to competition that were assumed to be unassailable.  

Along came a competitor, Amazon Booksellers, who looked at the huge walls, portcullis, moats and turrets and said… “let’s attack from a different direction;” online. Jeff Bezos breached Barnes & Noble’s supposedly impenetrable walls and then feinted with a huge barrier of his own.  Amazon's huge hyper-efficient warehouse centers and distributor relationships were unparalleled, and considered impervious to competition.  

Back in the saddle, Barnes & Noble was not easily tuned away.  With determination, and a war-chest, they attacked and built their own online distribution system. They invaded the Amazon castle, broke through the fortifications, and celebrated; only to discover that Amazon had, once again, disrupted the model by perfecting digital downloads for books with “Kindle.” 

Barnes & Noble stormed the gates and found the castle abandoned for another, more lofty, stronghold.  

The lesson, per Foreman, is that passive defenses are rarely a match for a determined invader.

“Instead of hiding behind walls, a defender sometimes must actively engage and disable enemy forces before they strike—rather than afterward, when it is too late.”

An Alternative to Building "Barriers to Entry"

I would add that the best defense is not “a best offense.”  Great companies fortify defenses while leveraging their leadership position to move on and move ahead.  By the time their fortress is inevitably, and ably, sieged… they are no longer there.  They have moved on to a better, more profitable, space.

 As always, your thoughts, comments and feedback are welcomed.

(c) 2015, David J. Katz - New York City

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