Original link: https://pt.plus/a-void-moat/
Moat can be said to be a Holy Grail level vocabulary for corporate strategy. No matter how many textbook definitions it has, it describes nothing more than a defensive value. If a company is lucky enough to stumble over from the start-up stage, at least it means that it has a few cards in its hand. Next, it will continue to face more powerful competitors in the later life cycle. Or a new challenger with a flexible body, no matter what kind, it hopes to have a kind of ability: the ability to use existing resources to carry out effective defense, and the ability to last this defense.
The widely recognized moat elements include the following:
- intellectual property and know-how;
- brand;
- Economies of Scale and Network Effects – Essentially an established monopoly position.
Corporate strategy is a study full of contradictions. As long as someone proposes a theory, someone can immediately raise objections and find cases to the contrary.
In this article, I will combine some books and articles I have read recently to analyze why these elements are actually vulnerable. I think this may be a very boring analysis, because many people simply don’t believe that moats really exist. My take is that maybe it holds true for some businesses, but too few cases to call it a general theoretical concept. If you observe most enterprises, you will find that it is originally a short-life organizational form. It was born to solve the problem of internal transaction costs, and it will die due to the impact of changes in the external environment. The moat, as an effort to maintain corporate value, is full of temptations, but it may make many companies get lost in strategic choices, and even miss the best time for self-salvation.
Among the three elements mentioned above, intellectual property rights and proprietary technologies are extremely cyclical, and they are the strongest driving force for disruption; brands are not anti-fragile enough, and once they make a mistake, they will never recover; while economies of scale and network effects, or monopoly positions, can It is a circular argument—it is the existing value that the moat is trying to protect, not the moat itself. We will also use some points of view to illustrate that it does not have the ability to persist.
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