Defensibility Strategies

Defensibility Overview

  • Defensibility connects the model to accelerate growth loops and make them sustainable.
  • Four forms of defensibility:
    • Network effects
    • Brand
    • Embedding
    • Scale
  • These increase retention, acquisition, and monetization.

Network Effects

  • Most important form of defensibility for a tech company.
  • Study found companies with network effects constituted 70% of value creation despite being only 20% of tech companies.
  • Basic loop: increased adoption increases product value, leading to more user acquisition and retention.
  • Four types:
    • Direct network effects
    • Data network effects
    • Cross-side network effects
    • Platform network effects
  • Companies like LinkedIn, Slack, Amazon, Salesforce, Airbnb, Google, Uber, and Shopify use these network effects.

Brand

  • Brand increases impact retention, acquisition and monetization.
  • Users reinforce brand message, increasing brand value over time.
  • Companies like Coinbase, HubSpot, Apple, Drift, Allbirds, and HIMSS benefit from brand-building.

Embedding

  • Increased adoption increases switching costs, leading to more product adoption.
  • Salesforce, HubSpot, Apple, and Google use embedding to drive growth.

Scale

  • Additional scale lowers costs or improves product value.
  • This leads to increased retention, acquisition, and monetization.
  • Examples: Amazon, Netflix, Stripe, and Bird.