Proprietary product

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Product Development

Mona

The Internet has fast become the world’s largest, most competitive and efficient marketplace.  As a consumer, it is blissfully efficient at surfing the right product at the best price.  Yet for a company, this means it is deadly fast at surfacing competition and the switching cost of your customer moving elsewhere if often close to zero.

In this network efficiency, the companies that will enjoy the most advantage are the ones that develop or aggregate proprietary product or services. Because such companies have something that cannot be (easily) found anywhere else, they will efficiently harvest demand for that unique good – often from all around the world.  This is a highly desirable and defensible position.  For example, SoundCloud has songs you can’t easily find anywhere else (e.g. Coldplay, Paradise remix), and as a result might outlast those who aggregate product which is more like a commodity on the Internet (e.g. ColdPlay Paradise radio edit).  Alternatively, your curation and user experience can be proprietary, but in this case demonstrative advantage is often harder to create and sustain.

The Author

Early stage investor at Index Ventures

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