The human mind deals with clutter the best way it can—by blocking most of it out. What gets in, those items that seem most useful or interesting, are labeled and stored in little mental boxes. Once a label goes on and a box is filled, the mind resists making changes to it. This simple fact has a profound effect on how businesses now compete.
To sustain success, companies have always needed to erect barriers to competition. At the beginning of the industrial revolution, for example, the favored barrier was ownership of the means of production. If a company had a knitting machine and its competitors didn’t, the company with the machine usually won.
When most companies had machines, the barrier to competition became the factory. If a company could afford to own and manage a large factory with trained employees and conveyor-belt efficiencies, the company with the factory won.
Later, when many companies had factories, the barrier to competition became access to capital. If a company could raise capital by selling shares or putting its factory up as collateral, the company with the capital won.
As manufacturing began to give way to the information economy, the barrier moved from monetary capital to intellectual capital. If a company had patents and copyrights to keep competitors from reproducing its products and processes, the company with the patents won.
Today, the intellectual capital barrier is showing cracks. Yesterday’s patents are losing their value as companies leapfrog each other in a constant race to innovate. Not only that, using intellectual property as a barrier can sometimes hurt companies rather than help them, since it can slow the growth of the business ecosystems that allow them to thrive. An example is Apple Computer’s early decision to keep its operating platform closely held while Microsoft’s standard platform swept the field.
Now, the battleground is moving again. While intellectual property, access to capital, and manufacturing efficiencies are still important, the newest barriers to competition are the mental walls that customers erect to keep out clutter. For the first time in history, the most powerful barriers to competition are not controlled by companies, but by customers. Those little boxes they build in their minds determine the boundaries of brands.
THE BARRIERS TO COMPETITION HAVE MOVED FROM THE PHYSICAL TO THE INTELLECTUAL, AND FROM WITHIN THE COMPANY’S CONTROL TO OUTSIDE IT.
A BRAND IS A PERSON’s GUT FEELING A ABOUT A PRODUCT, SERVICE, OR COMPANY.