Overview
A great product invites imitation; a great moat prevents it. Building a durable business means deliberately engineering one of the few structural advantages that resist competition.
This guide walks through choosing and building a moat, using the seven powers.
The steps
Know the seven moats
Study the full set: scale economies, network economies, switching costs, branding, cornered resource, process power and counter-positioning.
Match the moat to your business
A marketplace should chase network economies; a low-cost retailer, scale economies — as Walmart did.
Engineer switching costs
Get customers to invest in your product — data, integrations, habits — the way Apple makes leaving its ecosystem costly.
Consider counter-positioning
Adopt a model incumbents can't copy without self-harm, as Costco did by profiting from membership, not markup.
Invest before the payoff
The deepest moats, like NVIDIA's software ecosystem, are dug during years the market sees no reason to — a lesson in compounding and patience.
Key takeaways
- Products get copied; moats resist copying.
- Match the type of moat to your specific business.
- The best moats are often built years before they pay off.
- Counter-positioning is the moat that traps incumbents.
Frequently asked questions
Which moat is best?
There's no single best — the right moat depends on your business. A marketplace lives on network effects; a discounter on scale; a luxury brand on branding.
Can a company have more than one moat?
Yes, and the strongest do. Apple layers switching costs, branding and an ecosystem; that combination is far harder to attack than any one alone.