How To Build a Sustainable Moat
Silicon Valley likes to talk about moats
Moats are sustainable structural advantages that companies have over competitors. Warren Buffett only invests in businesses with moats.
Airbnb’s moat is “network effects” — the startup concept that as more people use the platform, the more valuable it becomes to everyone else. The network effect cycle creates momentum and, eventually, velocity. It strengthens over time.
Amazon likely has the most robust moat — its massive physical-digital infrastructure, developed over decades, would be outrageously expensive and challenging to replicate — and it gets stronger every day.
To me, the best moat — the structural advantage that an organization can establish early-on and strengthen over time — is to be purpose-driven.**
Being purpose-driven influences every decision: how to establish a clear, compelling value proposition; develop a differentiated brand; make tactical decisions; and chart a strategic course.
Most of all, though, purpose-driven organizations win by recruiting and retaining better people.
In purpose-driven organizations, people are the moat, which creates its own kind of network effects.
The larger the team and the harder the problem, the deeper the sense of purpose. Each additional teammate strengthens the purpose and, by extension, the organization. With such clarity, the team can focus all its energies on doing incredible work that, over time, extends the organization’s impact. Competitors cannot keep pace.
There are few things more empowering than purpose, and since so few organizations do this well, there are compelling strategic reasons to focus on it.
**** elite leadership, talent management, and execution are close**
