Getting an edge on competitive advantage

You”™ve talked before about businesses having a competitive advantage. What does that mean? How can my company develop a competitive advantage? And is it worth the time and effort?

Michael E. Porter, an author who has written extensively on the subject, states that competitive advantage “grows out of value a firm is able to create for its buyers that exceeds the firm”™s cost of creating it.” He proposes that companies achieve competitive advantage by, among other things, “providing unique benefits that more than offset a higher price.”

One of the most difficult questions for many small businesses to answer is, “What makes your company truly different?” The answer can lead to greater profits, barriers to entry for potential competitors, longer lasting high-quality clients, increased sales effectiveness and hiring advantage. Think of competitive advantage as a series of tools that set one company apart from all others.

One place to work on developing competitive advantage is in marketing. Usually your best customers have already figured out why your company is the best-in-class, when it comes to meeting their specific needs. Ask them to explain what they appreciate about your company and why they keep coming back for more.

Be aware of what your competitors are doing similar to and different from what you”™re doing. In the words of your best customers, define what sets your company apart. Focus on honing and expanding those skills and qualities.

List traits that identify your best customers. Then do research to find other prospects that fit those characteristics. Build a database of current and future “best customers” and use it as a competitive weapon. Cut down on wasted effort trying to appeal to poor quality targets. Tailor your marketing to attracting and nurturing prospects and clients that have the highest potential to be best customers.

Involve your sales force in attracting and keeping best-in-class customers. Make sure they know how to identify one. Also have them prepared to educate the market about what makes your company different. And ask them to keep their ears open for news on what your competitors are up to.

Develop unique systems for doing what your company does, as another sure way to create a competitive advantage. Make sure your process delivers a superior outcome, a better price: payoff ratio, or otherwise results in something buyers can”™t get anywhere else. Be aware that knowledge of systems is portable and ask all employees who have privileged knowledge to sign non-compete and non-disclosure agreements.

Look at how your company acquires materials and personnel. Can you corner a market on materials? Do your employees have special skills? Is your company a more attractive employer because of stand-out results with best-in-class customers? Can you translate this into a better product, service or payoff ratio, as compared to what everyone else has available?

In the long run, what you end up with are customers who buy from you based on the value of what you sell. Using competitive advantage, you get away from competing on price, which is a slippery downhill slope. You protect and expand market share because your company is the top game in town at what it does, and you make sure everyone knows that.

Be aware that competitive advantages are not permanent. The marketplace is always evolving. Competitors are always looking for ways to expand and improve. New resources and technologies become available. Improvements in education can turn into a game changer. Old customers fall away and new prospects arrive on the scene looking for better solutions.

Looking for a good book? Try “On Competition, Updated and Expanded Edition,” by Michael E. Porter.

Andi Gray is president of Strategy Leaders Inc., www.StrategyLeaders.com, a business consulting firm that specializes in helping entrepreneurial firms grow. Questions may be emailed to her at AskAndi@StrategyLeaders.com or mailed to Andi Gray, Strategy Leaders Inc., 5 Crossways, Chappaqua, NY 10514. Phone: 877-238-3535. Visit www.AskAndi.com for archived Ask Andi articles.