Not only competitive advantage, as a term, widely overused, it is also widely misunderstood. You are not alone if you have ever wondered what a competitive advantage really is and what you do with it. So what is it exactly? And if Buffett examined your company, would he find what he's looking for? Let's find out.
The 30-second competitive advantage challenge
Here's the 30-second challenge to determine if you know your competitive advantage. Ready? Go. I meet you at one of the numerous local networking events and you introduce yourself "Hi, I'm Bob Jones with ABC Company." "Hi Bob. Nice to meet you. Tell me a little about your company. What is your company best at?"
29, 30. Time's up! Could you answer my question in less than 30 seconds, succinctly with clarity? If yes, skip this column. If not, don't worry, you are in good company. The majority of businesses are also trying to figure out what they are best at. Honestly this question is hard to answer. You have to narrow your focus more than you are comfortable with. By the end of this column, you will be able to share your competitive advantage with confidence.
What competitive advantage is and isn't
Often starting with what something isn't is easiest. Your competitive advantage is not a list of your strengths. Not to down play strengths as these are important too. But if your competitive advantage(s) list is only comprised of strengths it is not a "competitive" advantage. Key word competitive. If you don't have a competitive advantage comprised of more than strengths, you don't compete. You exist.
The management team from a mid-sized financial services group reported that its competitive advantages were:
- Good reputation in the community
- Skilled staff
- Outstanding team and well-respected leader
- Strong client list and loyalty
- Flexible and responsive
A competitive advantage is something you do that is unique. The key here is to compete you have to have a unique advantage. Looking at the list from the financial services firm above, you can see that this is not a list of unique stuff. Basically anyone in business today needs to achieve that level of competency just to be in the game.
Think of your competitive advantage as your organization's DNA a collection of genes or assets that makes you unique. When you are true to your DNA, you are healthy, fit, and successful. When you compromise your DNA, you feel uncomfortable, slow and are exerting more effort than you should.
Your competitive advantage is what you, your company or your department does better than anyone else. The sustainable part refers to your ability to continue to do those things over a long period of time. And yes, you can have more than one advantage and you can develop advantages as well. You don't have to possess them all now.
The easiest way to find you competitive advantage is to answer these questions:
- What is my company best at in my market?
- Ranked in top 10 percent of money managers who beat S&P nationally
- Fastest-growing American Funds money manager in '00, '01, '02
- Only firm ever featured by American Funds in its advisory newsletter
- Sandy, an interior designer, determined she was best at increasing developers' sales ratio by 35 percent and was the only design team chosen by the top 10 luxury developers in the state.
- A clothing manufacturer named Joe said he was the best at wearable clothing because "Our clothes fly off the racks."
- The emergency service division of a county in Washington is the best at providing disaster management, response and recovery efforts for all agencies within its' service territory because of its skilled people and emergency response equipment.