The truth about competitive advantage

Karl R. LaPan, President & CEO, The NIIC
Photo by Shutterstock

The truth be told – I have always been a student of management strategy. From my early introductions to Michael Porter’s seminal work in college to my admiration of Jim Collins in my favorite business book of all times – Good to Great, I think there is an industry obsession with the concept of competitive advantage. However, it is often misused and misapplied.

Audit any website or piece of marketing collateral in any industry, and you’ll likely encounter something to the tune of “competitive advantage” mentioned or alluded to somewhere. What does that even mean in 2020?

This phrase has become trite because well-meaning business builders have co-opted the meaning to their detriment. Competitive advantage is not a list of your strengths. Furthermore, if your list is only comprised of strengths, it is not a “competitive” advantage. If you don’t have a competitive advantage built on more than strengths, you can’t effectively compete. You exist, and that’s no way to be. Competitive advantages are rare, special, hard to imitate and don’t last a lifetime. Innovative organizations have to continually morph and grow with changes in the competitive landscape and market conditions. For example, a tax firm may claim the following:

  1. Good reputation in the community
  2. Experienced staff
  3. Robust client list and loyalty
  4. Responsive customer service

At first glance, you can see that this is not a list of unique competencies or advantages. Anyone in business needs to have those core competencies to stay in business. An earnest business builder may think these points are something to write home about, but in reality, these are strengths in a SWOT analysis but seldom arise to become competitive advantages.

This begs the question: what is the right way? Think of your competitive advantage as your organization’s DNA—a collection of genes or traits that makes you one of a kind (special and rare) in your industry or geography. Your competitive advantage is what your company or your division does better than anyone else. It’s what you are, not what you do.

Maybe your business is young, and you’re still charting those waters. Or perhaps you’ve been around for decades and are too close to it to be objective. Either way, the easiest way to find or rediscover your competitive advantage is to remember what one of my undergraduate professors once said, “figure out what you do better than anyone else (distinctive competence) and pick competitors you can beat (competitive advantage) by doing what you do best.” Competitive advantages are not a laundry list. Companies may only have one that is why they are rare and fragile!

Now that you have figured it out, how do you put it into practice? When you have it defined and internalized, it will help you and your team know:

  • Which opportunities to pursue and which to decline (what should you stop doing is often more important than what you choose to do);
  • Where to allocate resources and where to cut back;
  • How to improve on what you already do well;
  • Discern the difference between an opportunity versus a distraction; and
  • When to outsource and when to keep it in house

The most innovative companies have an acute understanding of how to shape, evolve and continuously refine and invest in their competitive advantage, and it shows. So, what’s yours? In 2020, there is no better time to re-focus, re-shape and execute to create a sustainable and enduring competitive advantage!

So lift the organizational hood, and find out what makes your company rare and special, and most importantly, different and unique.


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