in Innovation

Having the API Rug Pulled Out From Under You

John Hagel observes how “the large Internet players are wearying of the high acquisition premiums for attractive Web 2.0 companies and are increasingly deciding to grow their own copy when they see an interesting venture.” So if you’re a start-up, what’s your new exit strategy? Hagel says…

The only sustainable edge in Web 2.0, as in all businesses today, is to get better faster by working with others…

There are basically two ways to do this. First, you can accelerate the innovation in the services you offer so that you are constantly one or two (or more) steps ahead of those tempted to copy you. Second, you can find ways to use your service offerings to build trust-based relationships with your users, ideally with some powerful network effects that will make it very difficult for later entrants to pry these people away from your service.