Create a competitive advantage
There's plenty of buzz about competitive advantage, or excelling in something your target market cares about. Competitive advantage drives revenue growth and profit. Yet often mid-market firms do not have a solid grasp on their competitive advantage.
A well-promoted customer advantage is a magnet for new business. It brings value to your customers that competitors cannot bring. There are two basic strategies for that advantage:
- 1. Becoming the cost leader in your industry.
- 2. Differentiating your products/services/company in order to reduce customer costs or increase customer sales. This can bring your company more sales and, with enough value, allows a higher margin.
How do you get it?
There are two essential methods for gaining advantage. The traditional annual strategic planning ensures the company is looking at its business environment and has selected strategies. However, the marketplace changes quickly, and annually might not be enough. So a more agile or lean strategic planning process can occur throughout the year.
Whichever mode you choose, the steps are essentially the same — just the timing is different.
1. Develop a deep understanding of your business environment
Better information leads to better decisions.
- Stay on top of the political, social, economic and technological trends, and understand the potential impact on your business.
- Know the attractiveness of your market — growth, profitability, ROI. Why are you in it?
- Know your competitive landscape. Analyze competitors' strengths and weaknesses, and put yourself in their shoes to consider their opportunities and threats. Be sure to include new entrants and potential substitutes.
- Make a thorough and objective assessment of your company's strengths and weaknesses, opportunities and threats. Take the time to get clear on what is non-negotiable.
- Become the expert on your target market's needs. Visit customers, spend time with them and perform objective research on your entire target market. Look for important unmet needs. Map the customer value chain. Will it reveal opportunities to reduce customer costs and/or increase customer sales?
2. Generate the competitive advantage
Review the data from the previous step. Often the new information and insight generate new unmet needs and new value to bring to the market.
Be creative. Possible advantages extend beyond products and services to employee engagement, company-wide market orientation, technological change, business analytics and more.
If the review of the new data isn't generating new opportunities, then get a diverse group involved in the review from different demographics, backgrounds and functional areas. Even get customers involved on an advisory board. Ask for different ways to view the information. Generate as many ideas as possible.
Then sort through to find the competitive advantage that fits the company strategy, capabilities and business environment. Check in with the market during implementation to get feedback on the changes.
3. Keep a sustainable competitive advantage
To maintain advantage, make a habit of strategic planning — either on an annual basis or in an agile manner. Hone the process. It's easiest on the company to stay the course and tinker where needed. In this case, important actual or future shifts, opportunities and threats provide impetus for real change. However, don't neglect the possibility of responding effectively as a competitive advantage in itself.
Tove Rasmussen, president of Partners Creating Wealth, and a member of Association for Consulting Expertise, provides business growth advisory services. She can be reached at Tove@PartnersCreatingWealth.com.
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