When to Dig a Moat: Crafting the First Mile of Product

When to Dig a Moat: Crafting the First Mile of Product

In the competitive landscape of business, companies that have the best products, most talented people, and fastest growth are precisely the ones for which moats are most important. A moat, in this context, refers to the barriers that protect a business' margins from the erosive forces of competition. These barriers can take different forms, including economies of scale, network effects, counter-positioning, switching costs, brand, cornered resource, and process power.

However, it's important to note that moats alone won't get you Product-Market Fit (PMF). According to Fred Wilson of USV, product should always come before strategy and business model. Before worrying about moats, startups need to ensure they have achieved PMF, as this is the foundation for sustainable success.

Jerry Neumann, in his article "Productive Uncertainty," highlights that the only moat that can create excess value for a new startup is uncertainty. Uncertainty keeps competition at bay long enough for a moat to be built. Therefore, the more obvious and easier it is to build your idea, the faster you need to dig moats. On the other hand, if your idea is less obvious and harder to build, you have more time to develop your moats.

To determine the depth of moat needed, you can consider the equation: How Obviously Good Your Idea Is - How Hard it is to Build. This will give you an idea of the urgency and priority in digging your moats.

Now, let's shift our focus to the first mile of product. Scott Belsky, in his article "Crafting The First Mile Of Product," emphasizes the importance of the initial interaction users have with your product. In the first 15 seconds, users are lazy, vain, and selfish. They have no extra time to invest in something they don't know, they want to look good quickly using your product, and they want to know what will immediately benefit them.

Belsky points out that successful networks and tools often have an immediate novelty or utility that precedes the larger promised benefits. Users don't want to make choices, especially in the first mile. They want simplicity and familiarity. Therefore, it's crucial to focus on the first mile of a user's experience and make it the most thought-out part of your product.

For startups with aggressive growth aspirations, Belsky suggests allocating at least 30% of your energy to the first mile of your product. This is because new users are the real source of growth. While it's important to cater to power users, neglecting new users can hinder your growth potential.

In conclusion, the connection between moats and the first mile of product lies in the importance of uncertainty and initial user experience. Moats are crucial for protecting your business in a competitive market, but they should be built after achieving PMF. The first mile of your product determines how users engage with your offering, and it should prioritize simplicity and immediate value.

Actionable Advice:

1. Prioritize achieving Product-Market Fit (PMF) before focusing on building moats.
2. Allocate a significant portion of your resources to the first mile of your product to ensure a seamless and valuable user experience.
3. Continuously evaluate and update your moats to adapt to changing market dynamics and maintain a competitive advantage.