b'BUSINESSMATTERSBoats and Moats: Five Ways to Build a Stronger BusinessBy Bob ShawW arren Buffet, the Oracle of Omaha, isand hasMy former company attorney liked to poke fun at my beenpop cultures leading investment guru overdream durable business telling me, it sounds like you want the past 50 years. His folksy attitude seems oldto be the first boat in a one-and-a-half boat town. Hats off school, especially when we consider todays unicorns, thoseto those of you who are living this dream. Buffet had the start-ups valued at over $1B. Old school cant fathom that 90same idea by first investing in newspapers in the 1960s and percent of todays public offerings havent yet turned a profit.more recently in BNSF railroad. Each market had room for While Buffet famously professes not to understand technolo- only one company, or an oligopoly at best, which deterred gy, his long-term investment record, focused on regular busi- new rivals who would face big investments and large losses. nesses with unique properties, is unparalleled. Imagine building a transcontinental railroad today from Buffets simile is that a business should be like a castle:scratch and facing competition with zero construction costs.continuously reinforcing its walls, making them higherArguing from other side, Elon Musk of Telsa has said and stouter, all while widening and deepening the moat.that moats are lame and that the pace of innovation yields Practically, a business achieves this by building a lasting com- true competitive advantage. Ive always thought that cycling petitive advantage that others cannot easily replicate. Thisfaster than your competition was a good move. However, it could be done by either 1). keeping rivals out of a market,is not a surefire recipe for success as many innovative firms or 2). having such a strong brand that consumers becomehave failed.loyalists and wont switch even when prices are raised. By continuously reinforcing this castle, you create a durableBuilding MoatsGladdingHearn-MBTAFerry-BW.pdf 1 10/24/18 2:04 PM So how do we boat people build moats? Here are five business for the long term. ways:1. Dock spaces in many locations are just plain hard to replicate. Superior visibility (saw the ship is the second-best marketing after word-of-mouth), foot traffic, parking, OVER 60 YEARS OF permitting, easy access, and a dozen other factors all make CUSTOMER CONFIDENCE it so hard to replicate many of our dock locations. Good ones are cherished; the great ones endure. I remember Tom Mountjoy, a founder of the Spirit cruise line, operating a speedboat business in Ocean City, MD that was a big hit. The next season one of his captains jumped ship and opened a boat next to his. The next season, one of the (now rival) boats captains bought a boat and opened shop next door. With a robust supply of docks, nobody was making any money. Sometimes it has taken years, decades even, to get the right, unique dock space.2. Sky-high new vessel construction costs force us to cling to our existing vessels, even to those well into their third or fourth decade of service. But are they relevant compared to contemporary shoreside venues and attractions, which do compete with your operation? Too often at years end we try to get through another season with minimal capital expenditures or capex. Or, we give our marine crews enough money for small projects, such as the updating GLADDING-HEARN bar one year, maybe renovating a restroom or boarding SHIPBUILDING area, only to find a decade later a situation a professional Duclos Corporation designer would be kind to call our theme rag tag. If you have an older fleet, make sure the ships sparkle and are relevant. gladding-hearn.com 3. Contract concessions are offered by government for unique locations. The National Park Service ferry 26DECEMBER 2019FOGHORN'