Michael Porter developed a PROFIT Model to outline sustainable competitive advantages for businesses. Two (2) Sustainable Advantages is typically the minimum requirement for success. As I applied to social media, the PROFIT Model looks as follows:
- Physical Resources – Does not apply in the traditional sense since this is a web-based venture. However, with a powerful search rank for your targeted keyword and combinations of keywords, location on search result pages could (and will need to) become a sustainable competitive advantage.
- Reputational Resources – Sites like that are held in high regard within the industry or interest you wish to launch your social media web venture in should have the backing of respected and integral professionals within that field and even sometimes celebrities as well. It is best for most social media ventures, since they are usually solving a specific need, to look to create a more niche reputation by participating at events in cities where you have good traction i.e. Huntington Beach, California would be a good place to launch a surfing social media site since they have the US Open of Surfing every year. This will allow you to secure a more powerful (one-to-one) reputation, which in many ways, has longer staying power than a superstar name.
- Organizational Resources – At the beginning of your social media venture is will most likely be comprised of a handful of individuals, make sure you are working with a good core group that you can trust. Although working in a small core group can pose some late nights and burning the candle both ends there are currently few advantages realized from robust tested organizational processes with the exception of agility which does in fact play a major role in creating successful web 2.0 businesses (the ability to change things on the fly based on user response).
- Financial Resources – Until venture capital (or angel) investment is part of the picture, you will not have the ability to bury competitors by out-spending them. VC’s and angels seem to be contantly growing in this social media space so don’t be afraid to search your LinkedIn for investors you may be connected to if you have a great idea!
- Intellectual Resources –Intellectual property is inherent with most social media web ventures. Make sure to have employee agreements that protect your and help avoid common pitfalls that many sites experience when building an online community. For example, building offshore to save money but not signing an NDA or IP rights agreement. While technical infrastructure is important, social infrastructure is of even greater significance as any foremost Web 2.0 entrepreneur will attest to.
- Technological Resources – If your social media initiative decides to open up its API in the future to application builders (partners), there will be a technological advantage in becoming a platform – which is a significant step forward from being a website. Many large platforms have done this, for example Facebook and Google both have API’s.
