Your competitive advantage is your sword. Your barrier to entry is your shield or "moat". Typically, these should be hard to copy things that you can evolve over time to make your business stronger. Here are some examples...

- Classic competitive advantages:

1. A strong sales force created by partnering which regional players that agreed to exclusively serve you (i.e. Groupon). In this case the barrier to entry is that, assuming you filtered your selections well, is very hard to get more or better seasoned/connected people to compete with an established player.

2. An algorithm that we developed and academia thinks is not going to work (Google). If academia thinks your algorithm is a good fit for the problem them that knowledge is public, well studied and been executed upon. (Google used secrecy, designed new systems and engaged in many partnerships with data centers initially to make their algorithm work at scale)

3. Network dynamics: Enlist developers and become a platform faster and better than the competition. This would create to barriers to entry: a spiraling viral growth curve that is hard to follow and the recognition and trust that developers will bring to your brand. Facebook won in part because of this and in part because MySpace, Ning and the other players couldn't execute as well as they did.

- Strong barriers to entry:

1. You already have 20M in VC, went global and have dominated most of the SERPS (search engine result pages) for your content network. This is a form of market share domination and you need to fight using guerrilla tactics in this case. For example, promote your site using social media, start in unexplored geographies or complete in the virgin mobile market. Some companies that fight using this technique are AOL, About.com, Demand Media and Mahalo.

2. A strong patent portfolio and the money and will to defend them. IP is not enough, you need good lawyers, the will to fight for your turf and a good set of Plan B's to execute when the competition infringes on you. Notice that you can't instantly avoid infringement, only deter it. Good examples of companies that use this include UStream, Apple and HP.

3. Brand and execution: People already know that DropBox is best to share files. But what if Apple created a new service to share files. They tried! But people are already familiar with the DropBox brand and prefer their execution: because now they can share files across platforms. Now, in order to win, the competition has to follow DropBox's model (which is the standard by which users measure quality) and then leapfrog them.

Business model design is a fascinating subject, if you which to answer most of your questions regarding this field and become a Jedi in the architecture of competitive advantages and barriers to entry, I suggest you do the following:

- Read "Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers"
- Read Bill Gates Biography: Hard Drive (that has some fascinating stories about how Bill expanded Microsof to Asia and dominated the market!)

- Follow Clayton Christensen on twitter and read some of his papers. He portraits many, many strategies for startups to disrupt markets and compete in uneven situations. http://claytonchristensen.com/bio.html