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Ok, bear with me, so moats are more widely associated with a castle but in 1999 Warren Buffett, arguably one of the most successful investors of all time, coined the term ‘economic moat’ as one of his ‘tests’ for potential investments.

"The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors." - Warren Buffett

So, let’s look at the definition of a moat for a moment

"A deep, wide channel dug round a place such as a castle and filled with water, in order to protect the place from attack."

So, if the castle is your business, building a moat around will prevent it from being attacked by your competitors – that moat is your competitive advantage.

By pinpointing the sources of competitive advantage in your business you can cultivate those resources, capabilities and competencies to create and maintain a profitable business over the long term.

This applies to businesses of all sizes and industries; from solopreneurs to multi-national organisations and the more competitive the industry the deeper and wider that moat needs to be.

Take a moment to think about the things that form a moat around your business; this is the first step in a creating your business strategy – if you would like to find out more visit http://www.thepositivepen.co.uk/creatingstrategy


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