Creating a new market category puts you ahead of the competition – temporarily. But as Strata Identity’s experience shows, the real challenge isn’t being first – it’s staying ahead once others notice your success. In a recent episode of Category Visionaries, CEO Eric Olden shared his strategic approach to building and deepening moats in emerging markets.
The Inevitability of Competition
When you successfully create a category, competition is inevitable. As Eric explains, “Inevitably with, when you do create a category, you’re going to have competition.” The key is preparing for this reality before it arrives, not after.
Architecture as Defense
One of Strata’s core strategies involves making fundamental architectural decisions that create natural barriers to entry. “It’s really about building features and technology into our product that makes our approach architecturally very different than everything else that’s out there,” Eric notes. This architectural differentiation isn’t just about being different – it’s about being better in ways that are difficult to replicate.
The Manual Competitor
Interestingly, Strata’s primary competition isn’t other software companies – it’s manual processes. “Modernization niche is super lucrative because the alternative is to do things by hand and that costs tens of millions of dollars,” Eric explains. This creates a unique dynamic where the moat isn’t just about technical superiority, but about proving the fundamental value proposition of automation itself.
Market Education vs. Innovation Balance
A unique challenge in category creation is balancing continued innovation with market education. Eric’s approach in 2024 demonstrates this balance: “Market the vision and sell the product.” This dual focus allows Strata to:
- Continue developing innovative features
- Make their existing solutions more accessible to customers
The Narrow-Deep Strategy
Counter-intuitively, Strata’s moat-building strategy involves narrowing their focus. “We’ve really oriented our go to market message around a very concrete, tangible set of value propositions, solving very tactical things,” Eric shares. This concentrated focus allows them to:
- Attach to existing budgets
- Solve specific, high-value problems
- Create deeper technical differentiation in a focused area
Customer-Driven Moat Building
Perhaps the most powerful aspect of Strata’s moat-building strategy is its customer-centric nature. “What’s different now is our roadmap is so clearly driven by what our customers that we have what they’re asking us for,” Eric explains. This approach creates several advantages:
- Ensures product development aligns with real market needs
- Creates switching costs through deep customer integration
- Builds loyalty through responsive development
The Long-Term View
Moat building in new categories requires patience. As Eric notes about their content strategy: “Over a long, many years of time, you start to build authority in that space.” This same long-term thinking applies to technical moats, where architectural decisions made early on compound over time.
Balancing Protection and Progress
The challenge isn’t just building moats – it’s doing so while maintaining momentum. “We’re really focusing and winnowing down the focus of what we’re doing, bringing to market the product expands, but our message contracts,” Eric explains. This balanced approach ensures that moat-building efforts don’t slow down market penetration.
Beyond Technical Moats
While technical differentiation is crucial, Strata’s experience shows that true defensibility comes from multiple sources:
- Technical architecture
- Market education and thought leadership
- Customer relationships and integration
- Focused expertise in specific use cases
The key is recognizing that in new categories, moats aren’t just about keeping competitors out – they’re about making your solution increasingly valuable to customers. As Eric puts it, it’s about “deepening our moat around what identity orchestration is and doubling down on the things that we do that are the highest priority things within our customers.”
For founders creating new categories, the lesson is clear: start building your moats before you need them, but ensure those moats enhance rather than inhibit your ability to serve customers effectively. The strongest moats aren’t just barriers to competition – they’re accelerants to customer value.
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