Maintaining a competitive advantage takes more than great timing or a single solution. Sustainable advantage requires a well-designed and well-executed strategy. This sounds very simple, but most executives don’t do it. The concept of strategy is still generally a misconceived idea irrespective if the wide popularity it enjoys in business literature. When executives fail the clarity test in their concept of strategy there cannot be a superior performance.
So you find companies competing without a strategy. Take the case of the extinct HiTV which set out to build a competitive advantage on EPL rights. EPL rights was tactical and has nothing to do with strategy and tactics cannot give you an enduring competitive advantage. That was why the company could not survive beyond their inability to sustain the rights to that premiership.
A strategy is not a particular action you take, it is more than a goal, it is a wholistic approach to competition involving every aspect of the business. That’s why its difficult to be copied. For example, it took US car manufacturers many years to get good at Toyota’s lean manufacturing methods, even though Toyota willingly gave factory tours to its rivals’ executives. More recently, traditional companies continue to struggle to adopt the digitally powered methods of online leaders like Amazon.com and Google, although the outlines of these methods are well known.
So now the market definition has now moved from quality fountain pens to writing implements. Under this consideration makers of pencils might also be considered as part of the competition. The new director was impressed. His people were beginning to think out of the box. But, no, Biro Swan was not.
The board members became confused. One look at another. Minutes passed, the room was filled with much silence you could hear a pin drop. Another man summoned courage and stood up. Every eye was set on him. ‘Its the telephone! We are in the communication business. The telephone is fast gaining more wide spread use in recent years. People can either write with their pen or make a call.’ Everyone nodded, this must be it. The director looked up and smiled, apparently happy that his people were making use of their mind. Under this new model, typewriters and word processors form part of the competition. But again, it was not the telephone.
Strategy is fundamentally about making choices. It is the company’s unique approach to competing and the competitive advantages on which this unique approach will be based. It is the positioning of a firm in its competitive environment. There are five key drivers of strategic effectiveness. The first is a clearly defined value proposition. ‘Me too’ competition rarely works if it does work at all. If you’re planning to have superior results you must have a clearly defined value you are bringing on the table. There are already several businesses in the world and I’m not sure there’s a need for more except there is some unique value you are bringing on the table.
In defining the value proposition you find yourself wrestling with three important questions: which customers should we focus on? This question is very important because one of the most expensive mistakes you can make in strategy is to try to serve everyone. You’re going to be prepared to make some customers unhappy if you are considering building a competitive advantage. So you decide the customers you want to serve and the channels through which you intend to reach them. Next you will have to ask yourself what specific needs of these customers are you going to meet. What kind of products or services are you bringing on the table and what distinctive features will they have? This will then translate the pricing policy you will adopt. With that you have a clear value you will propose to your customers. That’s the first step.
It is very important to understand that your competitive advantage derives from the individual things you do in the business in your process of creating value. A business a set of various activities summing up to create value. This is called value chain. The second key driver of competitive advantage is designing a distinctive value chain. If your value creation process is an exact replica of your competitors you can’t reasonable expect any competitive advantage. Your advantage comes from what you do differently from others that lowers your cost or gives you a superior quality. It is your job to configure your value chain in a way that is different from others. Your value chain delivers the most advantage for you when the advantages you gain from one activity reinforces another activity and another and another. This way they create a fit that will be very difficult to be replicated by your competitors.
Brian Reuben(@brianoreuben) is an advisor on strategy and leadership. He regularly conducts keynote presentations and senior executive workshops with companies around the world on strategy and leadership. He heads BusinessDay Training Was this article helpful?