Mercado Libre’s Formula for Becoming an “Invincible Company”

The opportunity:

Before analyzing what makes an invincible company, let’s examine the context that created the opportunity. If a company’s execution capacity is like the sailors’ skill on a frigate, the context is the weather conditions when setting sail.

1. Socio-economic context

E-commerce penetration and financial inclusion in LATAM are on the rise but remain far below developed countries like the U.S., China, Japan, or the U.K. This represents a significant opportunity for established players to capitalize on this growth trend.

2. Geography and market size

LATAM has a population of over 400 million people, larger than the U.S. (334+ million). Moreover, the market is far less mature compared to Europe, the U.S., or Asia. Many of the problems already solved in these regions remain unresolved in LATAM, offering fertile ground for innovation and the creation of value for people’s lives.

3. Regulatory framework

LATAM’s regulations are more heterogeneous and often reactive rather than proactive. Countries like Brazil and Mexico have made strides with modern regulations, such as open banking in Brazil and fintech laws in Mexico. These initiatives aim to bridge the financial gap and facilitate access to digital services but are far from achieving the cohesion and depth of the European model. This regulatory void allows companies like Mercado Libre to establish their internal regulatory ecosystems, setting standards in areas like logistics, payments, and financing. Analyzing the impact on GDP, more regulated regions like Europe show smaller gains compared to open, innovation-friendly countries like South Korea, the U.S., or Israel.

The Invincible Company

Companies that have led their industries for decades share a common pattern: they are machines for launching new products/services and are not afraid to abandon initiatives. In volume, they find quality.

According to Alex Osterwalder, “Invincible Companies” strategically guide, diversify, measure, and act on their existing business portfolios and potential new ventures simultaneously. They understand they can’t pick the winning initiative in advance, so they bet on many at once.

• Guide: Maintain a strategic portfolio to clarify which projects, innovations, or actions to pursue or discontinue.
  

• Diversify: Have a funnel of initiatives with varying levels of risk to minimize innovation risk. Allow the best projects and teams to emerge, increasing investment as evidence supports them.
  

• Measure: Systematically measure and visualize innovation and disruption risks across businesses and opportunities. Constantly assess how well the portfolio fits the future.
  

• Act: Use all available actions to optimize the portfolio. Examples from Mercado Libre:
  - In-house businesses → e.g., Mercado Play
  - Acquisitions → e.g., purchase of Deremate.com
  - Joint Ventures → partnership with Disney, HBO, and Paramount for Mercado Play
  - Corporate Ventures → Meli Fund
  

As Simon Sinek states, companies play an infinite game, not a finite one—their goal is to stay in the game and continuously improve. The pace of industry disruption can create an illusion of stability, but consider this video:

In 2007, Apple wasn’t even on the list of top companies; just 11 years later, it became the world’s most valuable company. Additionally, 52% of the companies in the S&P 500 in 2000 no longer exist today. This highlights how challenging it is to stay in the game and that no company, regardless of its market dominance, is immune to disappearing in the medium term.

Characteristics of Long-Lasting Companies:

Companies that stay in the game for decades share three foundational pillars:

2. Cultural Map

Core values and behaviors align all areas and employees to achieve results.

Culture Map by Strategyzer

Mercado Libre's cultural map

3. Brand identity

The definition of how the company wants to be perceived by the outside world, including customers, shareholders, the press, etc. The brand image must align with the strategic direction.

Take 2015 as an example: Mercado Libre was already profitable after many years of investing in business growth. However, thinking long-term, they decided to make a significant investment in logistics to create an even greater competitive advantage. From the shareholders' perspective, this might not have seemed like a good idea, as losing profitability could affect the stock price and, consequently, their wealth. Nevertheless, they moved forward with this massive project, and 10 years later, it has become one of their strongest value propositions.

Mercado Libre's logistics

This is not possible without a strong brand identity and cultural alignment that allows not only customers to understand what Mercado Libre represents but also its strategic partners—in this case, its shareholders. (A case where this did not go well was Meta, where shareholders wrote an open letter to Mark Zuckerberg, asking him to drastically reduce the investment made in the new AR/VR business unit.)

Portfolio Map

These three pillars serve as the foundation for nurturing Mercado Libre's innovation portfolio. As we mentioned earlier, the only way to stay in the game is through innovation. However, it’s not enough to simply create new products or services; there must be a balance of initiatives ranging from lower to higher risk/investment.

This is how Mercado Libre perceive innovation:

Portfolio Map by Strategyzer

If we analyze their portfolio, we can see that they have all types of initiatives, ranging from more or less established ones to those with varying levels of investment, at different stages depending on whether they are exploratory or ready to scale, and their potential or actual return.

Mercado Libre's Portfolio Map

Conclusion

Managing an innovation portfolio is no easy task, and as we saw in this post, it not only requires initiatives but also a culture and strategic direction to sustain it

.However, those companies that manage to do it well are the ones capable of creating a dynamic and lasting competitive advantage over time, allowing them to grow their business and reduce the risk of disruption that all industries face—a risk that is accelerating with technological advances (especially with the penetration and adoption of AI).

Additionally, unlike other established regions, LATAM seems to present unique opportunities where "Invincible Companies" like Mercado Libre emerge. These companies not only play the long game with excellence but also benefit from a highly favorable context and a landscape full of potential.

We strongly believe these companies are just getting started. The value they can bring to their users, the ecosystem, and the economy is still in its infancy!
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If you think that your company might need help implementing any of these frameworks, reach out to us!