Remora Strategies

It is interesting how much management as a discipline borrows from other disciplines. Much like the English language. That is for another day. Today, working from home, I got reading a lot of marine biology. Yes, you heard it right, marine biology. It is about Remora fish, and its relationship with sharks and other larger marine animals. Students in my IIMB MBA class of 2020 have heard of it in one of my sessions in the platform business course and a couple of groups also used this concept in their live projects.

What is a Remora and what is its relationship with Sharks?

The Remora is a fish. It is possibly the world’s best hitchhiker. It has an organ that allows it to attach itself to a larger animal, like a shark or a whale. The sucker-like organ is a flat surface on its back, that allows itself to attach to the belly of a shark. That is a reason why it is also popularly known as a sharksucker or whalesucker. Remoras have also been known to attach themselves to divers and snorkelers as well. The sucker organ looks like venetian blinds that increase or decrease its suction on the larger fish’s body as it slides backward or forward. They could therefore be removed by sliding them forward.

Remoras can swim on their own. They are perfectly capable. But they prefer to attach themselves to the larger fish to hitch a ride to deeper parts of the ocean, saving precious energy. Their relationship with the Shark is unique – they do not draw blood or nutrients from the Shark like a Leech. They feed on the food scraps of the larger fish by keeping their mouths open. While the Remora benefits from its attaching to the Shark, it does not significantly benefit or harm the Shark. Some scientists argue that Sharks like the fact that Remoras feed on the parasites that are attaching themselves to the skin of the Shark and thereby keeping them healthy. Some others are concerned about the drag experienced by Sharks as they swim deeper in the oceans, which can be significant when there are dozens of Remoras attached to the Shark. Both of these are not that significant enough for the Sharks to either welcome Remoras to attach themselves to their bellies, nor have they exhibited any behaviour to repel these Remoras away (like they do with other parasites). Read more about Remoras’ relationship with Sharks here.

This relationship between the Remora and the shark can be termed as commensalism, rather than symbiotic. If the Sharks indeed value the fact that Remoras can help them get rid of the parasites from their teeth or skin, then we could term this relationship as mutualistic.

Remoras and platform start-ups

What is a platform researcher studying Remoras? A platform start-up could solve its Penguin problem using a Remora strategy. It could piggy-back on a larger platform to access its initial set of users, with no costs to the larger platform. Let’s consider an example. A dating start-up struggles to get its first set of users. While it needs rapid growth of numbers, it should ensure that the profiles on the platform are of good quality (bots, anyone?). It has two options: developing its own validation algorithm or integrating with larger platforms like Twitter or Facebook for profile validation. It could create its own algorithms if it needs to validate specific criteria, though. It could use a Remora strategy, by attaching itself to a larger Shark in the form of Twitter or Facebook. This has no costs to Twitter or Facebook, and if at all, contributes to marginal addition of traffic to Facebook/ Twitter. However, for the start-up, this saves significant costs of swimming down the depths of the ocean (developing and testing its own user validation algorithms).

Remora’s choice

Don Dodge first wrote about the Remora Business Model, where he wondered how both the Remoras and the Sharks made money, if at all. Building on this, Joni Salminen elaborated on Remora’s curse. Joni’s dissertation elaborates two dilemmas multi-sided platforms face – cold-start and lonely-user.

The cold-start dilemma occurs when a platform dependent on user-generated content does not get sufficient enough content in the early days to attract more users (to consume and/ or generate content). There are two issues to be resolved in this case – to attract more users to sustain the platform, and in the process balancing the numbers of content generators and content consumers.

The lonely-user dilemma occurs when a platform dependent on cross- and same-side network effects tries to attract the first users. A subset of the penguin problem, on this platform nobody joins unless everybody joins. There is no intrinsic value being provided by the platform, except that being generated by interactions between and among user groups.

The cold-start dilemma can be typically resolved using intelligent pricing mechanisms, like subsidies for early adopters. For example, a blogging platform can attract influencers to start blogging on their site, by providing them with premium services. As they resolve the cold-start dilemma, and they attract enough users to blog and read (generate and consume), they could get to a freemium model (monetize reading more than a specified number of posts), while continuing to subsidising writers. The key is to identify after what number of posts, does one start charging readers, as too low a number would reduce the number of readers and high-quality writers would leave the platform; but on the other hand, too big a number of freely available posts to read, the platform may not make any money at all to sustain.

The lonely-user dilemma can be typically resolved by following a Remora strategy. By leveraging the users on a larger established platform, the first set of users could be sourced easily en masse. However, just having users is not sufficient – there is an issue of coordination: getting not just sign-ups but driving engagement. It is important that registered users begin engaging with the platform. Some platforms need more than just engagement, they are stuck with a real-time problem: like in  a multi-player gaming or a food-delivery platform, we need gamers to be engaged with each other real-time. Some other platforms need users in specific segments, or the transferability problem: that users are looking for others within a specific segment, like in a hyperlocal delivery platform, a matrimony platform or a doctor-finding platform. Such platforms need to have sufficient users in each of these micro-segments.

A Remora strategy could potentially help a platform start-up overcome these two major dilemmas – cold-start and lonely-user. By porting users from the larger platform, one could solve the lonely-user problem, and through tight integration with the content/ algorithms of the Shark platform, the Remora (start-up) could manage the cold-start problem.

Remora’s curse

The decision to adopt a Remora strategy is not just simple for a platform start-up. There may be significant costs in the form of trade-offs. I could think of five significant costs that need to be considered along with the benefits of following a Remora strategy. These costs include (a) holdup risk; (b) ceding monetization control; (c) access to user data; (d) risk of brand commoditization; and (e) exit costs.

Hold-up risk: There is a significant risk of the established platform holding the start-up to a ransom, partly arising out of the start-up making significant asset-specific investments to integrate. For instance, the dating start-up would need to tightly integrate its user validation processes with that of Facebook or Twitter, as the need may be. It may have to live with the kind of data Facebook provides it through its APIs. It may be prone to opportunistic behaviour by Facebook, when it decides to change certain parameters. For example, Facebook may stop collecting marital status on its platform, which may be a key data point for the dating start-up. Another instance of hold-up risk could be when Google resets its search algorithm to only include local search, rather than global search, thereby affecting start-ups integrating with Google.

In order to manage hold-up risks, Remora start-ups will be better off not making asset-specific investments to integrate with the Shark platforms.

Monetization control: A significant risk faced by Remora start-ups is that of conceding the power to monetize to the Shark. For example, when a hyper-local restaurant discovery start-up follows a Remora strategy on Google, it is possible that Google gets all the high-value advertisements, leaving the discovery start-up with only low-value local advertisements. There is also a risk of the larger platform defining what could be monetised on the start-up platform as well. For example, given that users have gotten used to search for free, even specialised search like locations (on maps) or specialised services like emergency veterinary care during off-working hours, may not be easy to monetise. Such platforms may have to cede control on which side to monetise and subsidise, and how much to price to the larger platform.

To avoid conceding monetization control to larger platforms, Remora start-ups need to provide additional value over and above the larger platform. For instance, in the local search business, a platform start-up would possibly need to not just provide discovery value (which may not be monetizable) but include matching value as well.

Access to user data: This is, in my opinion, the biggest risk of following a Remora strategy. Given that user data is the primary lever around which digital businesses customize and personalize their services and products, it is imperative that the start-up has access to its user data. It is likely that the larger platform may restrict access to specific user data, which may be very valuable to the start-up. For instance, restaurant chains who could have run their own loyalty programmes for its clients, may adopt a Remora on top of food delivery platforms like Swiggy or Zomato. When they do that, the larger platform may run a loyalty programme to its clients, based on the data it has about the specific user, which is qualitatively superior to the one that local restaurants may have. In fact, in the context of India, these delivery platforms do not even pass on basic user profiles like demographics or addresses to the restaurants. The restaurants are left with their limited understanding of their walk-in customers and a set of nameless/ faceless customers in the form of a platform user, for whom they can generate no meaningful insights or even consumption patterns.

It is imperative that platform start-ups define what data they require to run their business model meaningfully, including user data or even operations. It could be in the form of specific contracts for accessing data and insights, and/ or co-creating analytical models.

Risk of brand commoditization: A direct corollary of the user data is that the Remora start-up could be commoditized, and their brand value might be subservient to the larger platform’s brand. It could end up being a sub-brand of the larger start-up. For user generation and network mobilization, the Remora start-up would possibly need to get all its potential users to affiliate with the larger platform, even if may not be most desirable one. On a delivery start-up, hungry patrons may be loyal to the aggregator and the specific cuisine, rather than to a restaurant. Given that patrons could split their orders across multiple restaurants, it could be the quality and speed of delivery that matters more than other parameters. Restaurants might then degenerate into mere “kitchens” that have excess capacity, and when there is no such excess capacity, these aggregators have known to set up “while label” or “cloud kitchens”.

It is important that Remora start-ups step up their branding efforts and ensure that the larger brand does not overshadow their brand. The standard arguments or relative brand strengths of complements in user affiliation decisions need to be taken into consideration while protecting the Remora’s brands.

Exit costs: The last of the Remora’s costs is that of exit costs. Pretty much similar to the exit costs from an industry, platform start-ups need to be clear if their Remora strategy is something temporary for building up their user base and mobilizing their networks in the early stages, or it would be relatively permanent. In some cases, the platform’s core processes might be integrated with the larger platform, like the API integration for user validation, and therefore may provide significant exit costs. In some other cases, the platform may have focused on their core aspects of their business during the initial years and would have relegated their non-core but critical activities to the larger platform. At a time when the start-up is ready to exit the larger platform, it may require large investments in non-core activities, which may lead to disruptions and costs. Add to this, the costs of repurposing/ rebuilding asset-specific investments made when joining the platform.

Remora start-ups, therefore, need to have a clear strategy on what is the tenure of these Remora strategies, and at what point of time they would exit the association with the larger platform, including being prepared for the costs of exit.

Scaling at speed

Remora strategies allow for platform start-ups an alternative to scale their businesses very fast. However, it is imperative to understand the benefits and costs of such strategies and make conscious choices. These choices are at three levels – timing of Remora, what processes to Remora, and building the flexibility to exit. Some platforms may need to attach themselves right at the beginning of their inception to larger platforms to even get started; but some others can afford to wait for the first users to start engaging with the platform before integrating. What processes to integrate with the larger platform is another critical choice – much like an outsourcing decision, core and critical processes need to be owned by the start-up, while non-core non-critical processes may surely be kept out of the platform. In all of these decisions, platform start-ups need to consciously decide the tenure and extent of integration with the larger platform, and therefore make appropriate asset-specific investments.

Maintain social distance, leverage technology, and stay healthy!

Quote of the times

(C) 2020. Srinivasan R

App-in-app?

I recently got an email from my airline app that I could book my car ride within the same app. It was a way of providing end-to-end services. Much like the home pickup and drop service provided for business class customers by the Emirates. What are the implications of these for the customer, the airline, and the cab-hailing firm? Let’s explore.

It is an app-redirect

First, read the terms of how it works in the case of Jet Airways and Uber here. The substantive part of the T&C is hidden in the paragraphs quoted below:

“PLEASE NOTE, YOU ARE MAKING THE PAYMENT TO UBER DIRECTLY. JET AIRWAYS IS NOT RESPONSIBLE / INVOLVED IN THIS FULFILMENT PROCESS. JET AIRWAYS WILL NOT BE LIABLE AND/OR RESPONSIBLE FOR REFUNDS, DELAYS, REJECTIONS, PAYMENT AND FULFILLMENT OR OTHERWISE OF THE SERVICES OR IN RESPECT OF ANY DISPUTES IN RELATION THERETO, IN ANY MANNER WHATSOEVER.” (emphasis original)

Then, what is the value of this app-in-app integration?

Customer perspective

For the customer, it has the potential to work as a seamless end-to-end service. I imagine a future, where you would find a partner using Tinder or TrulyMadly, plan your evening to a game/ movie using BookMyShow, find a restaurant & book your table using Zomato, and take Uber whenever you are ready to move on, or better still, have an Ola Rentals car waiting for you through the evening. All in one app. Wouldn’t you love it, if all of it were integrated in one App? Just imagine the convenience if your restaurant-finder knew that you are in a particular concert at a specific place and you are likely to head out for dinner at a particular time. This specific knowledge could immensely help your restaurant-finder app to customize the experience for you – for instance, it could not only provide you those restaurant options that are open late in the evening after the concert was over, in a location that is close to the venue; it could possibly alert the restaurant that you were arriving in 15 minutes, based on your Uber location. And through the evening, post your pictures on Instagram and SnapChat, check-in to all those locations in Facebook, and Tweet the experience live.

Yes, you would leave a perfect trail for the entire evening in a single place, and if you were to be involved in an investigation, it would be so easy for the officer to trace you! No need for Sherlock Holmes and Watson here – the integrator app would take care of all the snooping for you!

Convenience or scary? What are the safeguards related to such data sharing across different entities? How will the data be regulated?

The Integrator perspective

Why would a Jet Airways provide an Uber link inside its App? Surely cab-hailing and air travel are complementary services. Plus, Jet Airways believes that its customers would find it convenient to book an Uber ride from within the Jet Airways app, as they trust the app to provide Uber with all the relevant details – like the estimated landing/ boarding time of the flight, drop/ pickup addresses, etc. Jet Airways also needs to believe that its customers would rather choose an Uber cab, rather than its competitor OLA Cabs, or any other airport taxi service. The brands should have compatible positioning. Given that Jet Airways is a full service carrier, and differentiates based on its service quality, Uber might be a good fit. But the same might not hold good for a low-cost/ regional carrier like TruJet connecting cities like Tirupati, where Uber does not operate.

Does integrating complementary services affect customer satisfaction, brand loyalty, customer switching costs, and/or multi-homing costs? In contexts where these services and brands are compatible, and there is a convenience involved in sharing of data between these services, there is likely to be some value added. Like airlines and hotels (hotels would like to know your travel schedule); currency exchanges and international travel (the currency exchange would love to know which countries you are visiting); or international mobile services. If there was no data to be shared between the complementary services, the user would rather have them unbundled. Think travel and stock brokerage.

That said, platforms find innovative complementarities. For instance, airlines (primarily the full-service carriers) have launched co-branded credit cards. In a recent visit to Chennai, there were more American Express staff at the Jet Airways lounge than the airline or lounge staff! And they were obviously signing up customers. What are the complementarities between credit cards and air travel, apart from paying from that card? A lot of business travellers have their business travel desks do the payments; consultants have their clients booking the tickets; and even for individuals and entrepreneurs, the credit card market is so fragmented that everyone holds multiple cards. And the payment gateways accept all possible payment options, including “paying cash at the airport counter”. They why co-brand credit cards – sharing of reward points/ airline miles. Either customers do not earn sufficient airline miles and using these co-branded credit cards help them earn more miles and retain/ upgrade their airline status (remember the 2009 movie, Up in the Air?); or they do not earn enough reward points in using their credit cards that they can redeem their airline miles as credit card reward points. Either ways, each one is covering up for the other.

In this covering up, or more diplomatically consolidation of rewards, the partners increase customer switching and multi-homing costs. Surely, redeemable airline miles might be more valuable to a frequent traveller than credit card reward points that have limited redemption/ cash back opportunities. But for loyalty to increase, it is imperative that both brands stand on their own – providing compatible services.

Mother of all apps

All this looks futuristic to you? A lot of you have been using an ubiquitous desktop app known as the browser for a long time, which has been doing exactly this! In a subtle form, though. However, there are firms that own multiple such apps, and they use a single sign-on – like all of Google services. Plus, even third-party sites like Quora allow for using your Google credentials to sign-in. The trade-offs are not always explicitly specified – it is always the case of caveat emptor – consumer beware.

Quora homepage

So, the next time you experience some cross-marketing across platforms/ apps, think what data might be shared across both the apps; and if you would really value the integration.

Cheers!

(c) 2017. R Srinivasan

 

Building your brand

This is not a post about marketing, though it may sound so. This is a post about how entrepreneurs and leaders communicate. This is relevant for brands and firms as well. Read on.

I listened to a very insightful TEDx talk by Simon Sinek on inspirational leaders. Listen to it here. He talked about how inspirational leaders focus on the inner most ring of what he called the golden circle. In the inner circle is the why, followed by the how, and then the what. He cited examples of ineffective communication, when firms and brands and individuals focused on the what to drive the how and why, and how successful people and brands and firms focused on the why first, before highlighting the how, and what. If you have not listened to it yet, please do so, before you proceed.

19.1 Brand communication

As we see a tramline of enterprises biting the dust, liquidating/ selling off to powerful competitors/ selling off at a fraction of its past valuations to firms in complementary businesses, this message is becoming far more relevant. Couldn’t resist this contrast …

Yahoo is a guide focused on informing, connecting, and entertaining our users.

https://about.yahoo.com/ 

Google’s mission is to organize the world’s information and make it universally accessible and useful.

https://www.google.com/intl/en/about/company/

 

Just take a look at how these two pages are organised – Yahoo’s page flows like this – a statement of what they do – inform, connect, and entertain; how did they start, how is it to work for Yahoo, and what does it offer for developers, advertisers, partners, and research. Google’s page begins with the company overview (that includes their history), who they are (culture and locations), what they believe, and then what they do.

If your communication focuses on what problems you solve (why you exist), and then lead towards how you solve those problems, and therefore what products and services you offer; I am willing to listen to you. On the other hand, there are entrepreneurs and firms that begin with what they do. For instance, early this week, I heard someone talk about building the Uber of Indian tractors for farmers (if the one who talked about this is reading this, don’t take it personally). I had to probe deeper and deeper to understand what problem was being solved and why did Indian farmers needed a mechanisation solution in the lines of Uber.

Virgin’s Richard Branson also wrote today (11 August) about why successful entrepreneurs should seek problems, and create solutions (read it here). Begin with the problem and the opportunity; the business model and the solution will follow; and thence products and services.

So, whatever brand you are building – of yourself, your firm, your products/ services, please begin with the why, the how, and then get to what. Build a robust brand that stands for something, signifies why it exists, and speaks to the ecosystem on why it exists. Remember the arrow that connects A and z in the Amazon.com logo? Everything from A to Z.

And in today’s world, as firms simultaneously diversify and depend on a cluster of complementors to provide (each others’) customers with unique value, it might not be out of place to conceive of your brand as a platform. A simple platform (like how the automobile companies use the word) upon which your complementors and partners could build on, customise, co-develop, co-innovate, and co-create. Brian Monahan’s post titled “More than a promise: Brands are platforms” (read it here) develops this argument very well. Brian’s primary argument is that brands transcend the promise and should allow for other firms and its partners to shape the consumer experience. Imagine brand Android!

Borrowing the idea from Simon Sinek’s talk, leaders communicate why more than the what. How is your brand communication structured?

Would love to listen/ read/ hear about your brand stories.

 

 

Flipkart Ads – Is there a shift in online advertising economics?

Yesterday, I read an interview with Sanjay Ramakrishnan, Senior Director & Head – Business development & Marketing, Flipkart Ads in Advertising Age India (read it here). It set me thinking, why is Flipkart into advertisements? Is it competing with Amazon or with Google, Facebook, and Apple as well?

Though I am tempted to label this development as the advertising market becoming a contestable market, I will refrain from doing so. Let me first explain what is a contestable market (in simple terms, of course, let me try; and in the context of platform business models), and then proceed to analyze if the success of Flipkart Ads is a source of worry for other platforms whose principal business model is based on advertising revenue.

The theory of contestable markets originated from the works of Baumol as early as 1982 in this seminal paper (available through JSTOR here). He (and his co-authors in subsequent papers) defined a contestable market as one with absolutely free entry and costless exit. Which implies that such a market would be vulnerable for a hit-and-run entry, i.e., by any competitor with no need for any specific assets, process capabilities, or differentiation.

A key characteristic of these markets is that the new entrant takes the prices prevailing in the market (of the incumbents) as given, and enters with the same price. In a perfect competition, any new entrant will increase the supply in the market, and should lead to a reduction in prices. Even when the market shares of incumbents and new entrants change, the industry price levels should ideally fall with increase in supply. In contrast, in a contestable market, the new entrant could enter the market with the same price as the incumbents. The justification for this assertion could be based on two arguments, that the new entrant enters the market at such a small scale compared to the incumbents that there is no visible change in the total market supply to warrant a price correction. The second argument is founded on the thesis that the incumbents cannot retaliate with sufficient speed to counter the threat posed by the new entrant, due to their systems and processes that bind them to a particular cost structure and a positioning in the market. In such a case, the new entrant could enter the market with a prior contract, preferably a long-term contract, at least as long-term as it takes for the incumbent to respond. In perfect competition or monopolistic competition, incumbent firms will adopt limit pricing strategies (if profitable for them) to keep new entrants at bay, i.e., as the incumbents sense the threat of new entry, they would reduce the prices to a level where it would be profitable for the incumbents and not for the new entrant. Take for example, when cola firms entered the bottled water market in India, the incumbent, Bisleri International embarked on a strategy of keeping market prices so low that it took a long time for Coca Cola Company, and Pepsico to break even.

The second aspect of contestable markets is the absence of any sunk costs whatsoever for both the incumbent and the new entrant. If any upfront fixed costs were to be incurred by a competitor either prior to entry (including in studying the feasibility of making money in that market) or at entry (like setting up manufacturing and distribution capabilities), the costs of entry will prevent this market from becoming contestable. Let me provide an example. In today’s world, setting up an online store entails no sunk costs for any retailer. The domain registration and hosting, website design, payment gateways, and fulfillment are all functions that are unbundled and offered as independent services (as SaaS) by different vendors, which makes all of them variable costs, rather than fixed costs. Such costs are neither fixed nor specific – one could use the payment gateway for any other online transaction, should this venture fail. Such markets with no sunk costs result in no barriers to entry and exit and therefore, are contestable. Contrast this with our previous example of Coca Cola Company and Pepsico entering the Indian bottled water market – this is a market that requires significant bottling and distribution capabilities. Though the cola firms enter this market with significant synergies from their core business, there were certain unique capabilities that the bottled water market required – sourcing of good quality water and plastic bottles, bottling lines that were specific to water, unique branding, and wider distribution networks.

The third characteristic of contestable markets is that the products are absolutely non-differentiable. That means, the new entrants can enter the market and imitate the products/ services offered by the incumbents at the same costs or even lower, and therefore maintain the same price levels. It is also possible that the new entrants enter with lower prices, and offer the same ‘standard’ products or provide additional features at the same or lower prices. Such standardization is highly visible in the context of platform services, like a C2C marketplace. In the absence of any product differentiation between competitors (any new feature is imitable quickly and is almost costless to do so), Quickr.com and OLX.in entered the market and took market share from incumbents like Sulekha.com or asklaila.com.

In summary, a market can be (or become) contestable when either of these conditions are met – no changes in prices (no limit pricing by incumbents), no fixed sunk costs, and no differentiation in products and services offered.

Is digital advertising becoming a contestable market?

For digital advertising market to become (and be) a contestable market, it has to allow for costless entry and exit, no sunk costs, and no differentiation. In the case of Flipkart Ads, I would argue that it would have cost Flipkart next to nothing to build the platform. The ecommerce store was in any case dealing with sellers, and all that they had to do was to extend the relationship to brands. And remember, in the Indian market, a lot of the brands had their own ecommerce retail operations and some of them were already on Flipkart as sellers. For instance, when I searched for the Prestige brand of pressure cookers on Flipkart, I found about 40-odd sellers including TTK Prestige, the brand owner.

And when Flipkart entered the digital advertising space, did Google and Facebook respond with limit pricing? I am not sure they did. A Feb 2015 LiveMint article that announced Flipkart and SnapDeal’s entry into online advertising space gave Google ad revenues as US$55bn compared to Amazon’s US$1bn (read it here). Given these sizes, it is unlikely Google and Facebook would have felt the need to respond to their entry by lowering prices.

Developing the advertising platform would possibly not involve any sunk costs for Flipkart. There is sufficient traction in terms of relationships with sellers and brands, the technology platform costs next to nothing to build, transaction costs are variable (including cloud storage and payment gateways), and even brand building is costless (as they are extending the same brand – Flipkart Ads).

It is the third condition of contestable markets that protects the online advertising market from becoming a contestable market, i.e., lack of differentiation. In the case of online advertising market, differentiation is created and sustained by superior targeting of advertisements to the right users. Measuring and monitoring engagement of the audience is the key in data collection; deep understanding of the consumer behavior and decision-making process is critical in analyzing this large volume of data; and close relationships with a wide variety of advertisers is imperative to ensure narrowcasting of advertisements to specific audience profiles. Here is where the product differentiation kicks in – the kind of browsing habit data that Google has access to is very different from the ‘buying intent’ that Flipkart can derive out of its customers’ behaviors. And especially in the context of mobile apps, the Flipkart app has access to other information like the person’s location, WiFi/ data connection information, and even his contacts; all of which could be useful to provide targeted narrowcasting (or even unicasting) of advertisements. Such shrinking of segments and the ability to serve what the marketers call ‘the segment of one’ customer can differentiate the new entrant, Flipkart’s services from the incumbent ‘Google’ and ‘Facebook’.

So, what are the implications for entrepreneurs?

First, evaluate if your market is indeed contestable, or is likely to become contestable. If there is a likelihood of your primary market being or becoming contestable, consider one of the following options:

  1. Change your business/ business model (pivoting is a fancy word these days in the startup ecosystem)
  2. Erect barriers to entry and exit – use regulation if you must (see how Airport Taxis in Bangalore are competing with OLA and Uber)
  3. Differentiate – even if it is not the most significant of your product offerings, focus on those value creation opportunities that involve sunk costs
  4. Wait for a new entrant and bleed him to death with limit pricing (you better have easier access to capital than the new entrant)!
  5. Wind up, sell out, and take your family (if you have one) on a holiday to Seychelles! And don’t forget to thank me!