The main point behind this category is to understand the importance of scarcity and be aware that there are ways to make your product/service unique and differentiate yourself from competitors.
| Low | If your product/service is easy to imitate and non-differentiable from competitors |
| Medium | If your product/service is somewhat differentiable from competitors |
| High | If your product/service is difficult to imitate and differentiable from competitors |
If the level is low then you should not go on with your new venture. If the level is low for your existing business, you need find new ways to differentiate yourself; especially through changes in product/service quality. If your level is high, move on to the next question
It is non-substitutable?
Substitute products are similar to imitators, however, substitute products/services do things in a different way. For example, Triumph Motorcycles may try to imitate Harley Davidson, but a car is a substitute for a Harley.
| Low | There are substitutes that directly reduce product/service demand |
| Medium | There are substitutes that indirectly reduce product/service demand |
| High | There are no substitutes |
If the level is low then you should not go on with your venture. If the level is low for your existing business, you have to start finding ways to reduce this effect. If your level is high continue to the next question.
5. Non-Appropriability (Is it appropriable?)
Appropriation is defined as the act of taking something for one’s own use, typically without the owner’s permission. When a venture is projected to be very profitable there are those who will attempt to appropriate the profits of the venture. Two questions answer whether your venture is appropriable or not.
Is there no slack? (waste & inefficiency)
Slack occurs when profits are reduced due to certain actions of players in the vertical supplier-customer chain. For example, when suppliers are inefficient (mismanagement, high wastage) then your profits shrink due to higher costs. An effective way to combat slack is through strategic structuring of incentives
| Low | There is a significant amount of waste and inefficiency |
| Medium | There is some waste and inefficiency |
| High | There is little or no waste and inefficiency |
If the level is low, then you should not go on with your venture. If the level is low for your existing business, you should try to re-structure your incentives to reduce slack. If your level is high continue to the next question.-->
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