When I wrote my first book, "Billion Dollar Company: An entrepreneur's guide to business models for high growth companies", I stated that I thought Michael Porter had missed a basic strategic alternative. Porter said there were three alternative strategies:
- Low cost
- Focus
- Differentiation
Based on my experience in Indonesia growing a billion dollar company in seven years, I thought there was a fourth strategy--access to capital. More capital (than the competition) offers two important benefits:
- Faster growth
- Better economies of scale
Together these benefits are sufficient to formulate a sustainable strategy, provided product/market fit is well documented.
Yesterday a friend was telling me that Blue Bottle Coffee had raised $45 million in venture investment with only six stores in New York and San Francisco. Subsequent to the investment the company was on a tear to make acquisitions and grow quickly. Looks like a relatively small company planning to grow fast and big through its access to capital. This "strategy" is common in today's market of high valuations and plentiful capital. Appears I may have been right when I said that Porter missed an alternative strategy.