Don’t be a ‘Poor Pioneer’: create Barriers to Entry

I often advise creative entrepreneurs who have innovative products or services. Sometimes it’s a completely new idea and they are planning to open up a new market for it.

Someone asked me whether I’m ever tempted to ‘steal’ the ideas people tell me about when I’m advising them. My answer was firmly No, for two reasons – more later.

My job as an adviser is to ask questions, including tough ones, to help entrepreneurs make their creative businesses even more successful. One question that goes straight to the heart of business strategy is this: “If you are successful in developing your new product or service, and open up a lucrative market for it, what is to stop other businesses (perhaps bigger businesses with more resources and power than you) following you into the marketplace and taking most of the profits?” It’s a killer question that sometimes people cannot answer.

Sometimes the truth is that there is nothing at all to stop others joining the party once all the hard work has been done. In this case I fear for the business concerned. I tell them that they may end up penniless after opening up new frontiers – they may become a ‘Poor Pioneer’.

Creative people take pride in being ‘groundbreaking’. But breaking the ground for others to make all the profit is not so smart!

In other cases the entrepreneur’s answer is that other businesses cannot enter the market and take the profits, because they have created some sort of ‘barrier to entry’ to prevent others joining the party. In creative enterprises the barrier to entry is often some kind of intellectual property such as a patent or copyright-protected work. In this case copycats cannot easily follow them into the marketplace with ‘me-too’ products or services.

Intellectual Property Rights are the creative entrepreneur’s defence against commercial predators.

Which takes me back to the question of why I don’t copy my clients’ ideas and set up a rival business.
The first answer is that it would be unethical to do so and I have a reputation to protect.
However the second answer is more pertinent and more powerful; it is in two parts:

  1. I don’t want to steal something that in turn can be stolen from me. In other words, if there isn’t a barrier to entry for me, then there isn’t a barrier to entry for further competitors. I too could end up being a Poor Pioneer.
  2. The business initiatives I really do envy are those that do have barriers to entry, that have some kind of monopoly rights for the owner to exploit alone. But of course these are the very ones that I cannot steal!

So I either (1) don’t want to, or (2) cannot set up as a competitor to my client after hearing about their new business initiative. I’m still ethical, of course, but that’s not really relevant here.

The most successful creative enterprises are capable of both (a) developing new products or services and (b) using intellectual property rights to protect their position against competitors so they can enjoy the fruits of their creativity without ‘new entrants’ stealing market share.

So don’t be a Poor Pioneer, looking back bitterly on all the creative work you did, only to find that other people made all the money from it. Use intellectual property rights in partnership with your creativity, to devise a successful business model.

It’s much more fun to be a Rich Pioneer !

See also: Creative Labourer – or Creative Entrepreneur? and Let’s follow George Lucas