Everybody in business is seeking a competitive advantage. That elusive “thing” which allows the business to stand apart from the competition. But where is competitive advantage to be found?
Michael Porter (Harvard Professor) said over 30 years ago that there are only two sources of competitive advantage – cost leadership and differentiation.
To any reader of my posts would know I talk incessantly about value. Unfortunately I believe too many businesses don’t do enough to understand what is really valuable to their prospective customers and then communicate the value of what they do. But enough of that for the moment because my strong belief is that through understanding what is valuable and then connecting with that value is the easiest source of competitive advantage for small business.
To achieve a competitive advantage through cost leadership is nearly impossible for a small or medium business. Many small businesses unfortunately sit in between cost leadership and differentiation. That means they have no real sustainable competitive advantage. Why then do so many small businesses try to compete on price? It just does not make any sense.
But wait differentiation is not just about a great product. The next thing I see businesses saying is that their great product is a competitive advantage. Product innovation is important but it is only a source of competitive advantage for a short while. The market will copy or introduce a similar product in time and then the cycle starts again.
Jack Welch (former CEO of GE) is quoted as saying that there is only two sources of competitive advantage – the ability to learn more about your customers faster than your competition and the ability to turn that learning into action faster than your competition.
So what problems are you solving for your customers? How are you doing it different and better than anyone else? How are you constantly keeping up to date with what is happening in your customers world?