While it’s illegal to use performance-enhancing drugs in sports, it’s not illegal or even unethical to pursue revenue-enhancing strategies to gain an advantage in the business world. On the contrary, it’s how shrewd entrepreneurs win big. As Jack Welch famously said, “If you don’t have a competitive advantage, don’t compete.”
It’s challenging enough to succeed in business. When you’re forced to compete on a level playing field, it’s 10 times more difficult. Looking back, I’ve always had some type of competitive advantage when I won big in business. When I haven’t, I’ve been less successful — or I’ve failed outright.
Competitive advantages can take many forms. The more obvious differentiators are things like better pricing, superior service, or cutting-edge technology. But strong personal relationships, operating transparency, or simply having a better “why” than your competitors can also be advantages that drive business success. That’s why businesses increasingly differentiated themselves successfully by committing a percentage of profits to meaningful social causes or establishing buy-one, give-one charitable models.
The bottom line is, figuring out what makes your product or service different — and better — than the competition and leveraging it to stand out in a crowded marketplace is critical to achieving success.
Your competitive advantage isn’t always what you think
Figuring out your unique competitive advantage can take a bit of work. Most entrepreneurs start by researching customer and market needs, followed by a traditional SWOT analysis. Plotting your company’s strengths, weaknesses, opportunities, and threats out on a grid is a helpful first step. But it shouldn’t be the last.
Chances are, you can rattle off basic SWOT components without a lot of effort. Try to push your analysis further to ensure it goes beyond the obvious. Dig deeper by using frameworks like the Five Forces model that help you assess factors like the bargaining power of suppliers and the impact of new entrants into your space.
After completing your assessment, you may conclude your competitive advantage boils down to something as straightforward as superior technology. If that’s the case, take full advantage quickly, because it won’t last forever.
My company once had a fantastic competitive advantage based on access to a proprietary software tool that enabled us to pull combinations of related keywords directly from Google through access to its API and build massive campaigns with the push of a button. What took our competitors hours of painstaking research when crafting campaigns could be accomplished by our team within minutes. This technology provided a significant differentiator that accelerated our growth and profits right up until Google decided not to renew the API rights.
Other competitive advantages may not be as immediately identifiable. When doing your analysis, seek opportunities where your company can be a big fish in a small pond or gain a foothold in an untapped market.
For example, in the hypercompetitive digital advertising world, my company has found success by moving to where the business is going, not where it is. As a result, we were early advertisers on channels like Google, Facebook, and Taboola. Now, with those channels more mainstream, we’re continuing to pursue our fast-mover advantage by looking for new channels where we can get in and reap results ahead of everyone else.
Building early expertise and offering services in new areas — arenas your clients and competition alike are unfamiliar with — is a powerful differentiator.
5 steps to find your advantage
If you’re not clear about your company’s competitive advantage, it’s mission-critical for you to figure one out in order to pave your path to success.
Even if you think you know what sets you apart, it’s worth going through a reassessment periodically. You’re likely to uncover new advantages to leverage and build upon — and you can have more than one! Looking for your competitive advantage? Here are five easy steps to finding it:
1. Look in the mirror.
Start with honestly answering questions about yourself: Why do customers choose to do business with your company? What do they rave about? What do they complain about? What are their complaints about your competition? Your answers will give you a starter list of potential advantages to explore.
2. Size up the competition.
Take a close look at who your company is up against in the market. Use the Five Forces model to evaluate competitors’ advantages and the competitive intensity in your market. You won’t necessarily have to reinvent the wheel to find your differentiators. Success leaves clues. Consider creating a competitive advantage modeled on your competitors’ by improving on it and making it distinctly your own.
3. Take a 50,000-foot view.
Don’t skip this step. It’s crucial to look beyond your industry at how companies you admire differentiate themselves. Examine how they leverage their competitive advantages and whether the approach can be applied to your industry. While you’re thinking big, explore a “blue ocean strategy,” in which you create an entirely new market for your products, rendering the competition irrelevant. Even if it’s not a viable option, thinking through the possibilities will strengthen your differentiation strategies. Plus, it’s fun.
4. Cultivate debate.
Put your insights and analysis from the first three steps in writing and share it with your team, your mentors, and your advisors. You want as many voices as you can get discussing and dissecting your options. It’s helpful to debate each idea and listen to what others think before narrowing down your list.
5. Decide and commit.
Once you’ve determined your unique competitive advantage, commit to leveraging it in every way possible. The execution, including how you position your offering to your customers, is critical for long-term success. Chosen wisely and delivered effectively, your competitive advantage will set you apart from other fish in the sea, accelerate your growth, and drive profits.
(Featured image by sundaemorning via Shutterstock)
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.
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