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    « Starbucks and Customer Analytics | Main | So What do You Do? »

    May 28, 2008

    How Wide is Your Moat?

    If you have never read Warren Buffet's annual letter to his shareholders I highly recommend it.  It is not only full of wisdom, but its actually quite funny.  I found myself recently reading his letter on a plane and laughing out loud.  In his latest letter to his shareholders he mentions that when looking at a potential investment he looks for the company's "enduring 'moat'".  It causes him to rule out companies and industries that are prone to rapid and continuous change.  He is looking for barriers to entry and things that are hard to change.  His philosophy is similar to that outlined by Jeff Bezos, Amazon CEO.  He looks for businesses that build core competencies and strengths in things that don't change or are hard to change.  Furthermore after he invests in a company every year they measure the performance of their investments not only on objective earnings growth, but also on a subjective measurement of whether their investments widened their "moat".

    When you look at the reprographics industry and your own company - what is your moat?  How wide is it?  Is your moat great customer service?  Is it the ability to print faster and cheaper?  Is it a specific technology you are using?  How solid are these?  Think long and hard about this.  Is your "moat" really deep and wide?  How hard is it for your competition to close the gap?  Will your differentiation really last?  Is it enduring?

    If you don't have good answers - seek them.

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