Competition

Although critical mass is the only metric that can be relied upon, it is subject to continuous change. For example, critical mass is affected by competition: if competition becomes intense, it becomes more costly to compete and critical mass goes up. If there is less competition, critical mass goes down.

Using the formula in a spreadsheet model, it is easy to estimate relative competitiveness. If a competitor has a smaller critical mass they will be in a stronger position. It will give them more scope for reducing their prices, increasing their marketing efforts, improving customer service and support or enable them to put more funds into product development.

By far the most threatening aspect of e-business is the ease with which competitors can come up with a superior or less expensive product or service. The difficulty of achieving critical mass offers some protection as it may require a substantial capital investment to persuade a large body of customers to switch loyalty. This would be particularly true if the customers themselves were an important part of the product or service (such as an employment agency).

In warfare, opposing sides may fight a war of attrition, where each side depletes the other side's resources at the expense of their own. Usually such wars are won by the side whose resources last out the longest. Similar battle can be fought in the arena of e-business, where businesses may be prepared to sustain heavy losses until they have won over all the clients. However, such victories carry a high penalty because the losses have the effect of increasing the winner's critical mass as these losses have to be recouped (or higher equity earnings allowed for).

In warfare, there will be an advantage to the side that has the more efficient armour or firing power. In e-business competition, the advantage will lie with the business that has the lowest critical mass. This provides another important rule:

12) The business should have a lower critical mass than its competitors.