The Third Moat

Photo by Marvin Meyer on Unsplash

When people think of business moats, they traditionally think of either technological moats or financial moats. However, I think there’s a third moat that is not only viable, but can be used across mediums and is ideal for small businesses.

That moat is the strategic moat.

To understand why the strategic moat is viable, let’s quickly review the other two. A financial moat is helpful solely because it’s hard to get the capital to break into the space in the first place. A technological moat is a technical innovation that allows your product or business to go much faster or more efficiently than the others. Now, the key thing to point out about both of these moats is that they are not guarantees. They can stave off competition for a limited time, but they won’t give your business a free ride. The strategic moat, like the financial and technological moats, is also not a guarantee; but it’s intangibility provides it some special benefits.

A strategic moat can be defined as a business moat based on leadership, management, and goal setting. A strong goal, a good culture, and a sufficient means of execution can, like the other moats, put you into a much more relaxed position in comparison to your competitors. Now, the tradeoff here is that you need to have the talent in play to exercise these goals in the first place. The benefit is that, unlike the previous two moats, the advantage isn’t ethereal. Certainly leaders might be switched out, but the plan and building blocks they made stay — the difficulty of maintaining the moat isn’t in constantly innovating, or constantly gaining new funding, but rather simply making sure the plan stays in place and hiring people who can continue where another person left off. Harder than it seems? Certainly. But it does put you in a much less dire position than an uncertain tech lead or a short runway. 

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