Warren Buffett on “the economic moat”…Nigel Vaz on “the digital moat”

At one of Berkshire Hathaway’s annual meetings years ago, Warren Buffett explained his approach to identifying the longevity of a business’ competitive advantage. He always tries to find “a business with a wide and long-lasting moat around it, protecting a terrific economic castle with an honest lord in charge of the castle…it can be because it’s the low-cost producer in some area, it can be because it has a natural franchise because of surface capabilities, it could be because of its position in the consumer’s mind, it can be because of a technological advantage, or any kind of reason at all, that it has this moat around it.”

In his recently published book Digital Business TransformationNigel Vaz points out that the economic moat focuses on one or a combination of moat types: low-cost production or distribution; scale; high switching costs for customers or suppliers; and intangibles, such as brand, intellectual property rights, or government regulation and licenses. Times change and so must business strategies and tactics.

In today’s global marketplace, Vaz suggests, longevity of a business’ competitive advantage requires a “digital moat.” He cites three examples: Coca-Cola, Amazon, and Uber.  (“Amazon and Uber were born digital and maintain their moats by being digital to the core.”) All three have transformed several industries by establishing “hard-to-duplicate, digitally supported products, services, and experiences that continually align with changing customer behaviors and technologies.”

Their digital moats are complete, wide, and deep.






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