What are barriers to entry?

Discussions About Establishing Your Barriers to Entry

As you prepare your value map, consider how you can create an antibiotic against harmful organisms. Antibiotics have long existed in the biological world before Alexander Fleming’s work on penicillin in 1928. They are chemicals produced by one microorganism in order to prevent another organism from competing against it.

These “barriers to entry” enable an organism to create space for itself in an overcrowded ecosystem. Basically, watch out for value gaps in your value maps and have plans for strengthening weak links in your value chain. As they say at Oracle, “Lock in customers, lock out competitors.” Barriers to entry can lengthen your venture’s lead time and provide important advantages, including helping your venture strengthen its brand name, broaden its solution set/product line, and achieve cost advantages through the learning curve.

Barriers To Entry
A venture should consider using any or all the barriers discussed below.

Technical Barriers Include:
 – intellectual property
– patents
– trade-secrets
– lead-times with technological developments
– “man-hours” in code crunching
– a “mad-scientist” on board
– unique design features and/or functions
– compatibility with proven products
– access to developers’ tools and research and development through strategic partners
– scalability of production line

Strategic Barriers Include:
– domain experts on team
– experienced executives
– long-term contracts with distribution channels
– history and credibility of team/founders in marketplace
– traction with marquee customers
– investors in the deal
– branding, service marks
– co-branding with strategic partners
– employment contracts
– first to get research grants and awards
– special connections to lead user groups

Put on Your Tire Chains Here: Finding Traction to Move Ahead!
The best barrier to entry is sales traction in the market. We now provide some ideas and suggestions for finding traction in different market environments, based on the work of some influential thought leaders, especially Porter and Kotler.

Finding Traction in an Emerging Market
Remember, you have to persuade marquee customers that they need you; you become a “must-have.” It involves educating the marketplace, maybe going against the biggest competitors and some established norms in the industry.
– Are you prepared to be in the education business, as well as your original business? Examples are holding seminars, conferences, and meetings in order to educate the industry about the benefits of your solution.
– Can you be supplying the supplier rather than a direct participant?

Finding Traction in a Growing Market
Growth and profits will come easily to anyone who drops a line in the water. You will need to satisfy the customers quickly or someone else will. Also, a growing market attracts new entrants, which will force “reactionary pricing” by the established players. You know, this could be your only chance to make it big really quickly.
– Are you structured for this growth, do you have a growth strategy?

Finding Traction in a Mature Market
Growth can be achieved but it will be difficult. The market is proven, the rules are written, and the norms are established. You will find that the “pie” is not finite.
– You will have to come in through a niche and be prepared to defend it. Consider how fragmented is the industry?
– Who are the leaders?
– Do you really have the best product for this ecosystem?
– Have you considered being an innovator and enabler in another industry?
– Or can you identify subsegments of your industry that might be growing faster than the other segments?
– Can you identify micro-niches where being small can provide an advantage?
– Would it be possible to enter a market with a product you have now, then introduce innovative upgrades?
– How about seeing opportunities visible to you but not visible to leaders in your industry?
– Finally, are you prepared to lead the industry change, as there might be fast followers in your wake?

Finding Traction in a Declining Market
How can you position your venture as viable and growing in a declining industry? Consider that some competitors will be dropping out of the market, which might be enough to leave you some headroom for growth, or at least some breathing room to quickly plant some roots, and then later move into other markets.
– Can you get started here and then diversify into other industry sectors?
– Or you could be known as the “last-to-leave” in the industry, meaning you could buy up other inventory, their customer accounts, know-how, even partner with industry leaders to takeover their accounts.

SOURCE: Roadmap To Entrepreneurial Success