So what is competitive advantage?
Quite simply, it is the thing(s) that make your business better and give you an advantage over your competitors. It is the 'differentiator' that will help to ensure your business thrives.
Ask yourself, what makes my business better than that of my competitors? What sets us apart? These are the fundamental questions that you should be asking yourself as you seek to innovate your business processes and attract more customers with the aim of not only reaching your short term goals, but more importantly, sustaining your business over the long term.
"Your competitors never stand still, so neither should you!"
As in all areas of life, business and markets are fluid and dynamic things that are constantly changing, so deserve your constant attention. What set Nokia apart as the world-leader in mobile phones was blown out of the water when Apple introduced the game-changing iPhone back in 2007.
Remember, your competitors never stand still, so neither should you!
Ok, so I know what competitive advantage is, but how is it achieved in the real world?
In reality, lots of different ways, Davidson in his seminal work Even More Offensive Marketing (1997) identified many types of competitive advantage, here are seven of them:
- Having a superior product or service.
- Having a perceived advantage in customers' minds through advertising and brand positioning, for example, think Coke versus Pepsi.
- Cost leadership. This isn't just about being the cheapest, it is ensuring your overhead costs are streamlined, which in itself can have a significant effect on profitability, and remember, turnover is vanity, profit is sanity.
- Legal advantages such as copyrights, patents, sole distributorships etc. making it difficult for your competitors to 'muscle-in' on your business.
- Superior relationships with customers, with suppliers, distributors and partners.
- Possessing superior skills and competencies.
- Attitude advantages. Are you happy where you are or are you eager to drive your business forward?
Take a long look at the above and ask yourself, how am I achieving competitive advantage in my business?
Are there things I could be doing differently, or better?
Why would my customers choose my business over my main competitors?
What makes my competitors good/bad?
These types of thought-provoking questions will prompt you to think about your business in a way that embraces the concept of continuous innovation, continuously reinventing your business, building on previous successes and seeking new, exciting ways to succeed again and again.
Therein lies the crux, competitive advantage on its own is not enough, you need to constantly strive to innovate, reinvent and change in order to achieve 'sustainable competitive advantage', the holy grail of achievement for all market economy businesses.
Imagine Apple still trying to sell the first generation iPhone today versus the other smartphones on the market, or Microsoft trying to pit the first generation Xbox against Playstation 4. If any of today's big players stand still and stop innovating and reinventing to maintain their sources of competitive advantage then they will pretty soon become the Woolworths, Saab, Borders and Blockbuster of tomorrow.