A Very Brief Analysis of Thiel vs. Helmer on Competitive Strategy
I’ve been recommending Zero to One for so long now that I decided to re-read it. It’s interesting that in Chapter Five, Thiel identifies only 3.5 of Hamilton Helmer’s 7 Powers as the keys to long-term competition barriers (Helmer refers to these “Benefit/barrier combinations” as “Powers;” Thiel of course calls them “monopolies”). Thiel’s monopoly/barrier creating strategies are:
Proprietary intellectual property (a sub-set of Helmer’s Cornered Resource)
Scale Economies
Network Economies, and
Branding
Thiel misses Helmer’s concept of Process Power, but more importantly he actually seems to reject Helmer’s strategies of Counter-positioning and implicitly, Switching Cost (see Don’t Disrupt, p. 56). Thiel says the best startups don’t compare themselves or consider themselves as adjacent to “competitors.” (“[I]f your company can be summed up by its opposition to already existing firms, it can’t be completely new and it’s probably not going to become a monopoly.” - p.56). There’s no allowance for a Red Ocean environment in Zero to One; according to Thiel the startup must be in a Blue Ocean in order to survive and thrive long-term. Helmer also addresses his book to innovation-based startups, but in contrast to Thiel, he expects a startup to have and face competition, either now or in the future. Helmer’s iconic seven strategies represent the comprehensive set of barriers a startup can erect to protect its offered benefit from inevitable competitive threats.
While I generally agree with and recommend much of Zero to One, I do not agree with Thiel’s narrower approach to competition. At least two of Helmer’s seven proven strategies specifically represent “opposition to already existing firms.” Yes, I am a Helmer fanboy, but bear in mind that while Thiel is certainly way-above-average intelligent and accomplished as a founder and investor, Helmer’s strategies are the result of and supported by decades of his painstaking, objective research and hundreds of case studies. Helmer makes a strong case, with examples, that Counter-positioning one’s innovative solution against the incumbent competitors’, or ensuring that customers will bear high Switching Costs if they contemplate switching to competitors’ solutions, are very viable and successful long-term strategies. Adjacent competitors do and will exist, even for the most exciting and promising “zero to one” startups, and disrupting them via the competitive barriers espoused by Helmer is the path to achieving long-term profit capture and growth.