OpenAI and Anthropic just saw their competitive advantage in generative AI change drastically in the last few days. Their billions of dollars in spending (and funding) aren’t turning out to be quite the protective moat around their business like they thought.
The TL;DR of the DeekSeek news is this: DeepSeek developed a significantly cheaper method to do generative AI. DeepSeek’s new models have come out of left field to shock and disrupt the Silicon Valley status quo, catching the entire generative AI industry in the US flat-footed. Kylie Robison and Elizabeth Lopatto at The Verge summed up this development succinctly: “DeepSeek’s successes call into question whether billions of dollars in compute are actually required to win the AI race.”
This news has me thinking a lot this week about competitive advantage. The visual of a moat – a body of water surrounding and protecting a castle from would-be invaders* – is a powerful one. As business owners, we should all aspire to build and maintain moats around our brand and service offerings. A durable and sustainable competitive advantage is a powerful tool for growth and we should focus on regularly and consistently updating our systems and businesses to reflect this.
How does a small business sustain its competitive advantages?
Two small recommendations.
1 – Your company’s brand is amplified by you and your employees. Leverage your people and their passion for your business. Give your people the time and tools to create something, improve a process, or interview customers. Guide them on their journey, but allow them to take ownership and share their findings with the company (and if appropriate) with your customers.
2 – At the end of every sales cycle (successful or not) you should be asking your customer for constructive criticism and feedback. Not because you want reviews, though social proof is very powerful, but because you want to learn and get better. Was something confusing for the client? Will they recommend you to colleagues, friends, or family? If they chose to go with a competitor, why? You need to be asking these kinds of questions in order to continue to iterate and improve your services in alignment with your customer needs.
See you next week.
++ Brett ++
* “If you will not show us the grail, we shall take your castle by force.”
Further Reading:
Deep Impact by Ed Zitron in his newsletter Where’s Your Ed At?
5 Sources of Competitive Advantage to Drive Growth by Catherine Cote in Harvard Business School Online Business Insights
How An Economic Moat Provides a Competitive Advantage by Peter Gratton in Investopedia
What Is Social Proof by Shubham Gupta in Gartner Digital Markets