Bootstrapping Strategies Part 2: “Fatigue Makes Cowards of Us All” — Vince Lombardi

My fitness trainer often shouts this phrase to me whenever I am beginning to hit the wall during workouts (Terry Canon, respect).  The motivation of the phrase is simple – when we get tired or when we are faced with adversity; our mental strength and concentration are put to the test.  And those that have the resiliency to fight through adversity and stay focused on goals will have a significant competitive advantage over those that cannot.

In 2005, Ubiquiti would launch its first product called “SuperRange” – essentially a super-charged Wi-Fi module for long-distance outdoor wireless applications.

Because the product had incredible demand from a niche market of independent operators and distributors that served them, we were able to secure customer payment upfront to fund manufacturing and instantly became a profitable business with cash flow.  The appeal of our “SuperRange” module was that it performed better over long-distances compared with the standard commodity Wi-Fi modules being sold in volume.  Although we charged a cost premium for our module compared with the existing commodity one being used at the time, the operators had no problem paying the premium as they saw it had a great overall cost/performance improvement in their systems.

However, there were 2 disastrous variables working in the background that would inevitably be fatal to my initial business strategy:

  1. Our $35 manufacturing cost was representative of our economies of scale in 1,000’s of quantities.  In contrast, the popular commodity modules had a $20 resale price were coming from Asia in 1,000,000’s of quantities.  Interestingly, there was no significant intrinsic design or manufacturing cost premium in our enhanced design compared to the commonly sold commodity module.  We were just completely outmatched with our competitors from a manufacturing volume/cost leverage standpoint.
  2. Our improvements were simple HW design additions that could easily be copied

You can imagine what happened next.  The commodity Wi-Fi module manufactures soon noticed our growing business and gross margins and said “Hey, this is a great idea; we can manufacture a premium module design and take over their market”  Within months, they copied our HW design and clones started appearing in our sales channels at below our manufacturing costs.

Overnight, growth slowed, customers turned on us saying we had no business selling such over-priced hardware, and I found myself in an impossible position to compete; I was contemplating shutting the doors and moving on with my life.

The irony is that the majority of people who had chimed in with an educated business opinion on my initial strategy told me this would happen.  And it played out exactly like they said it would.  But, I didn’t listen; and I learned a very painful lesson that would cause me to question myself.  As it turns out, it would become the stage for the best opportunity I could wish for.

We shouldn’t look at being handed adversity in life as a bad thing; if you are up for it, then it really becomes an opportunity to find out what you are made of.  And if you can develop the ability to step up and conquer even the most hopeless of challenges, you certainly will gain an attribute that will give you a significant competitive advantage over your peers.  Instead of letting adversity get the best of me, this would mark the first inflection point in Ubiquiti’s growth.   I would quickly meet adversity head-on, recalibrate, and adopt a new strategy that would define an Industry.

7 Responses to Bootstrapping Strategies Part 2: “Fatigue Makes Cowards of Us All” — Vince Lombardi

  1. Javier Blanco June 12, 2012 at 5:00 pm #

    A Victory without danger is a triumph without glory….. keep going RJP, you raise the bar, we follow the lead.

  2. Cliff Hanger June 13, 2012 at 8:43 am #

    Excellent post. What happened next ?

  3. Andrew June 13, 2012 at 8:54 am #

    Robert,

    Congrats on the Grizzlies and all of your success! Read the article about you in Forbes back in January and found it to be really motivational. I am 27 and left my job last year to privately invest my own capital.

    Right now, Ubiquiti is my biggest position, and just added more when I read you had bought the Grizzlies. I have read everything on the internet that I can find about you, and I found it really impressive.

    It is fantastic what you have done/are continuing to do. I am excited to see what is in the future for both you and Ubiquiti.

    -Andrew

  4. Marc Gayle June 13, 2012 at 11:28 pm #

    Robert,
    I love this series you are doing here.

    I just wrote an article (in case you are wondering – http://marcgayle.com/the-life-of-a-bootstrapper-canada-denied-me-a) on my blog about the travails of bootstrapping and a reader sent me the link to this series.

    I have been doing this on my own for the past year and a half, and had no advisors per se.

    If you have the time, can you just check out a few articles on my blog (to get a feel as to the type of person I am) and reach out to my (via my contact page) if you mind connecting.

    Could really do with some advice from someone that has been through it before.

    I know that sounds like a lot, but I see no way to reach you otherwise – so I figured if I hear from you, then that’s a good sign.

    Thanks.

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  6. Robert Braudy June 17, 2012 at 7:44 am #

    What did u do?

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