The Value of Defensibility: Looking Back at mixi and Exploring Competitive Advantages in Startups

The Value of Defensibility: Looking Back at mixi and Exploring Competitive Advantages in Startups

In the era of the end of Heisei, let's take a moment to reflect on the social media platform that Japan gave birth to - mixi. At the time, mixi operated on the premise of "being yourself," and it thrived because it provided a space for individuals to share content. It was still an invitation-only platform back then, and the ability to narrow down the audience was a feature that would prove to be invaluable in the future. Perhaps one of the ideal online communities that people are searching for is a mixi community. The community function of mixi was truly remarkable.

Comparing it to Facebook, which has a feature called "Wave," you can see that the design of communication with the intention of reflection can be challenging. In this regard, mixi's "Atoato" (footprints) feature had a nice touch, as it conveyed the idea of dropping by someone's profile without causing any disturbance. The creation of "steps" in communication is something that is uniquely Japanese. Even though most people may not care about the information shared, having a space where they can freely tweet without any worries is essential. At the same time, we need a space where we can enjoy this freedom. When considering where to return to when trying to find ourselves, mixi might be the place some people end up.

Now, let's shift our focus to the realm of startups and explore the concept of defensibility. The most significant value for founders lies in understanding the importance of long-term defensibility. It is from businesses with strong defensibilities that founders and investors see massive returns, often reaching 100X or 500X.

So, how do startups gain competitive advantages? Speed is a crucial advantage in the short and medium term. Being able to move faster than competitors can give a startup a significant edge. It is the number one competitive advantage that every startup can give itself. Capital also plays a role in creating defensibilities. Companies like Uber, Square, and NextDoor have demonstrated that raising more capital allows for faster hiring, the acquisition of market share, and the establishment of real defensibilities.

Having a unique team, whether through technical talent or unique insights into a customer or market, can provide a competitive advantage. Additionally, companies like Zillow, Yelp, and Facebook have found success by offering users unique content either at launch or shortly after. Buzz is another factor that can contribute to defensibility. When companies like Slack or Meerkat capture the imagination of influencers in the tech and media industries, it becomes easier to fundraise, hire talent, gain press coverage, and attract customers.

Furthermore, relationships matter. The Silicon Valley ecosystem offers a competitive advantage due to access to capital, press coverage, talent, and insights from a network of individuals working on similar problems. While patents can provide defensibility, they are becoming less relevant in the software and digital world.

In the digital world, there are four primary defensibilities: economies of scale, brand, embedding, and network effects. Companies like Amazon benefit from economies of scale, which provide a range of advantages as they grow. Branding, as seen with Booking.com and Google, can also create defensibility. Embedding, exemplified by Workday, Oracle, and SAP, occurs when a company integrates its software into a customer's operations, making it difficult for the customer to replace them with a competitor. Lastly, network effects, seen in LinkedIn, Alibaba, and Craigslist, occur when the value of a service increases with each additional user.

If you are starting or investing in a business, it is crucial to thoroughly consider how to design it with one or more of these core network effects to ensure defensibility.

In conclusion, looking back at mixi and exploring the concept of defensibility in startups, we can see the value in creating spaces where individuals can be themselves and freely share content. Additionally, understanding the various competitive advantages that startups can leverage, such as speed, capital, unique teams, and content, is essential for long-term success. To further enhance defensibility, incorporating one or more of the four defensibilities in the digital world - economies of scale, brand, embedding, and network effects - is crucial.

Actionable Advice:

1. Prioritize speed and strive to move faster than competitors. This will give your startup a significant advantage in the short and medium term.
2. Focus on building a unique team with technical talent or insights into your target customers or market. This will provide a competitive edge that is difficult to replicate.
3. Consider incorporating one or more of the four defensibilities in the digital world - economies of scale, brand, embedding, and network effects - to enhance your startup's defensibility.

In summary, by drawing insights from the past and understanding the factors that contribute to defensibility, startups can position themselves for long-term success in a competitive landscape. Whether it's creating a sense of community like mixi or leveraging competitive advantages in speed, capital, unique teams, and content, founders can build businesses that stand the test of time.