First, what is competitive advantage? I’m glad you asked.
Competitive advantage is something you do better than competitors. And, we like to talk about sustainable competitive advantage — meaning it’s hard for competitors to catch up to you. Hence, price isn’t really a sustainable competitive advantage unless you produce products at a lower cost than competitors, making it hard for them to match your price.
Some things that build competitive advantage are (with significant help from Business Insider):
- Unique products — that’s why patents are so important
- A full product line — which allows you to capture customers then keep them as their tastes and needs change. This uses a customer focus on new product development rather than a product focus. Apple is a good example where the firm continually developed new products for the same market despite major differences between product categories.
- New business model/ way of doing things — Dell originally succeeded because he developed a new business model based on combining surplus parts into custom computers. Ford created a sustainable competitive advantage when he used an assembly line to reduce the cost of his cars, which allowed him to sell his cars cheaper.
- An amazing team — a great team of talented employees and managers who are cheerleaders and coaches to help them achieve challenging goals is hard to beat. A bad team makes it hard to create good customer service.
- Brand equity — brand equity is EARNED over time by producing great products that solve important consumer problems, outstanding customer service, and acting as a responsible corporate citizen. Companies that consistently achieve these goals become iconic brands.
- Vision— you build a competitive advantage when you can see what’s happening and proactively respond to change. Steve Jobs faced this when he pushed the Mac over the already successful Apple II. In hindsight, the change seems obvious, but it’s hard to tear resources away from your flagship brand to develop something that’s disruptive and makes your existing brands obsolete.
How to build competitive advantage?
Saying you’re going to build a competitive advantage is like saying you’re building a viral marketing campaign — the proof is in the outcome. The question is what steps build competitive advantage?
You can ONLY build a competitive advantage when you KNOW what competitors are doing. Doing the same thing, just a little better doesn’t build a competitive advantage that’s sustainable. And, it’s difficult to maintain a competitive advantage if you don’t know how close competitors are to catching up.
Build competitive competencies
Building on your environmental scan, determine what consumer problems remain and find a way to solve them.
The Giant grocery stores in my area recently added a pickup service for busy professionals. Current options of shopping in the store or arranging delivery weren’t meeting the needs of these folks to get something fast and cheap. Now, customers go online to order groceries, either by shopping the aisles or by typing in a grocery list, then arrange a time to drive up. Their order is loaded into their car at the appointed time. Easy, fast, and at no charge for the convenience.
Hire great folks and love them
No team hires the best college quarterback then tells him everything he’s doing is wrong or treats him like he isn’t important to the team.
I’m very careful about the folks I hire for my team. I want people who are smart, but more than book smart (despite being a marketing professor). I want folks who think outside the box and are hungry. They should want my job.
Then, I let my folks do their jobs. I clear the decks to allow them to be successful. And, I give lavish praise when someone does well. I don’t need to hog the glory. I want my folks to see how valuable they are to my company.
When they aren’t successful, we talk about what roadblock they encountered and I try to blast them away.
You don’t build a competitive advantage by taking the easy approach. Things can get pretty scary. I saw a great quote once that guides me:
No one ever shrank to greatness
You can’t become a great company and build a competitive advantage without breaking a few eggs.
Measure, monitor, modify
You can’t turn your marketing and business operation on autopilot if you hope to build a competitive advantage. You need to assess how your strategy is working and tweak it until you get the results you expected. Build KPIs (Key performance indicators) based on your goals, then measure your performance on these metrics.
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