The Only 4 Sustainable Competitive Advantages

Highlights

  • Pursing the wrong competitive advantages or advantages that are not really that competitive dilutes every marketing message, sales offer and company communication. It is extraordinarily counterproductive to business growth.
  • Identifying the right sustainable competitive advantages increases both effectiveness and efficiency of brand development, marketing programs, sales strategies and company communication. It further creates a synergy whereby each of these programs build upon and reinforce each other.
  • Building sustainable competitive advantages preserves investments and creates momentum. It also withstands disruptive technologies, competitor encroachment and the erosion of all other capabilities.
Johnny Grow Revenue Growth Consulting

Being competitive starts by understanding exactly how customers make purchase decisions and what they most want from their vendors. You use this information to create or expand sustainable competitive advantages.

No company can invest in everything nor be the best in everything. So, it's critical to focus on the areas you choose to be best, be certain those areas create the growth you desire, and create or extend unique company capabilities in those areas.

Competitiveness used to be gained from operational excellence, with capabilities such as leaner manufacturing, superior supply chains or better use of IT. But now these competencies deliver little differentiation and are essentially table stakes.

Competitive advantages used to be things like products, price, staff, service and location. But even these benefits are fleeting as they are universally achieved by more competitors. In the minds of customers what was unique positioning is now easily substitutable and highly commoditized.

A Double Whammy

Additionally, customers are shifting how they make purchase decisions. Top decision-making criteria have evolved to wanting innovative products and services, providers that know how to engage and build relationships with them, and providers that know how to deliver consistent, rewarding and memorable customer experiences.

So, with changes in the competitive environment and customer buying criteria, how do you determine which competitive advantages are the most powerful to acquire, grow and retain more customers?

Well first, you need to define competitive advantage.

Advantages are only competitive advantages if they meet the four criteria of being relevant, measurable, unique, and sustainable. The first two – relevant and measurable – are much easier to achieve than the latter two – unique and sustainable.

I'll cut to the chase. In most industries there are only four competitive advantages that meet the definitional criteria. They are innovation, corporate culture, customer affinity and business intelligence.

Sustainable Competitive Advantages
1

Company Innovation

Innovation is the process of converting a novel idea into a unique product, service or experience that delivers value. This may include new products or improved products, new ways for customers to procure products such as bundled or piecemeal (unbundled) products, or new ways to consume products such as creative subscription plans, limited time usage or sharing.

Innovation is not limited to eccentric entrepreneurs and futurists. But it does require passion, persistence and a business culture that often looks more like a start-up than a mature company.

So how do you innovate, and create breakthrough products and services? Innovation is not prescriptive, but it does follow patterns that can be repeated.

Innovators most often apply Design Thinking, hypotheses based on customer insights, quick experimentation, customer response measurement and fast-paced iterations that move prototypes closer to a well-defined goal. These steps should be solidified in an innovation methodology that brings measurement, visibility and predictability to the outcome.

Company Innovation
2

Customer Affinity

Customer affinity means knowing your customers better than your competitors, and using that knowledge to better serve them, solve for them, build relationships with them, and earn their loyalty.

It turns first time buyers into repeat customers and repeat customers into customer advocates. And that makes customer affinity a valuable and durable asset.

Customer affinity is essential because strong customer relationships are a leading indicator of increased customer purchases, referrals, customer share and retention; all factors that deliver significant and sustained business growth.

So how do you create customer affinity? A common starting point is to define where you your company has unique strengths that are important to customers.

Competitive Positioning

Then you can apply one of several customer strategies designed for just this goal. They include customer experience management, omni-channel customer engagement, Customer Relationship Management and loyalty programs. Each of these customer strategies has overlap with the others but is unique and delivers unique benefits.

3

Corporate Culture

For most organizations, company culture is the single biggest untapped asset to boost staff productivity, employee tenure and company growth. Corporate culture is the human performance engine that either enhances or degrades every business strategy, revenue initiative, operational performance and change transformation.

High growth companies don't rely on individual heroics. They rely on everybody doing their part. Culture is a precursor and top contributing factor to anything and everything that requires staff effort.

Teams, not individuals, are required to achieve sustained success.

Every company has a culture. Most low performance cultures are a consequence of unplanned actions, unforeseen behaviors and random outcomes. In contrast, high performance growth cultures are intentional, proactively designed and in a constant state of awareness and improvement.

So how do you create a high-performance growth culture? Start by defining your culture ideology, which includes your identity, purpose, vision, values and behaviors. Then align your ideology with the business strategy and operational processes. Recognize the 6 culture levers that determine business impact, and then communicate, model, coach, measure and reinforce the ideology. Refer to the Culture by Design framework for a proven approach.

4

Business Intelligence

Many companies are data rich and information poor. Business Intelligence (BI) can fix that.

But succeeding with BI is a 4-part formula.

  1. Data transformation is needed to convert data from an unused byproduct to actionable information. When done at scale, this transforms data from a raw material to the company's most valuable asset.
  2. BI tools such as dashboards, reports and predictive analytics are needed to get the right information to the right person at the right time so staff can improve a customer interaction or make a more informed decision.
  3. Information insights are needed to elevate information from being merely interesting to inducing action. Information is powerless unless and until it creates action.
  4. A data driven culture is needed to deliver the last mile of BI. Management must promote a culture that shifts decision making from intuitive, gut-based and subjective decisions to data-driven, fact-based and objective decisions. This is often done with what many analytics experts call at DDOM (data driven operating model).
Business Growth Formula Predictive Model

The most successful businesses are defined by their ability to collect and curate the right data, use data to create differentiating products, services and customer experiences, and apply analytics to make insights actionable at every customer engagement and decision point.

Business Intelligence is a sustainable competitive advantage because applying data-driven insights to improve customer interactions and make better business decisions never loses its value.

One More Point

If you need proof of businesses that rested on competitive advantages that were not sustainable, consider what's happened to the Fortune 500. About three-quarters of the companies listed on the Fortune 500 in 2000 are no longer around – they have been taken over, gone bankrupt or simply no longer exist.

Or consider the eroding lifespan of an S&P 500 company as shown below.

Company Lifespan S&P 500

See the only 4 sustainable competitive advantages that withstand disruptive technologies, competitor encroachment and the erosion of all other capabilities.

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