Identifying your competitive advantage
Identifying your competitive advantage - the one thing you do better than anyone else - is actually harder than it sounds.
In the end though, identifying your competitive advantage really comes down to one of three things:
- Process: Do you do things better than everyone else in an organisational sense? (If you run things more efficiently you can do things more cheaply than your competition, which means higher margins or lower prices. Or both. Streamlined processes may also enable you to deliver your products or services more quickly than your competitors).
- Expertise: Do you offer cutting-edge services or products? Are you a thought leader in your area of speciality?
- Relationships: Are you effectively a trusted adviser or partner to your clients?
Choose your focus
These are all things that you can do to differentiate yourself. But here’s the big thing: you can’t have a competitive advantage in all three.
You can only do one of them really well.
If your focus is on relationships, you can really only manage a handful of clients. And that won’t give you the low cost base that a process advantage needs.
Likewise, if you occupy the high end of the market with your expertise, you might not have the time needed to build intimate relationships with customers. You can’t be on call for thousands of customers 24/7.
"If your focus is on relationships, you can really only manage a handful of clients."
In effect, these three areas tread on each other’s toes. You can be reasonably good at all of them. You just can’t be the best at all of them.
We can’t all specialise in relationships
I’d hazard a guess that most soloists would say that their strength is relationships. It’s the nature of our business models. Because we’re on our own we need to connect with others and build our networks and connections.
I’ve helped a number of small businesses articulate their philosophies, and they’ve all said that what makes them different is the time they spend listening to their clients and really understanding what they need and how they think.
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If that’s your take on your competitive advantage too, be aware that while focussing on relationships may make your business different from the big players in your market, it doesn’t necessarily differentiate you from other small businesses.
Furthermore, if one of your goals is to grow your business, a relationships-focus may have built-in limitations.
Approach from a different angle
Take the time to re-evaluate what your customers and prospects are really looking for. Check out your competition too. Is there a gap in the market that you could fill?
If your target market is hunting for value, take another look at your processes. What can you do more efficiently? If you sell products, how can you reduce supply chain costs? If you sell a service, what best-practice processes would allow you to turn work around faster?
There’s a whole industry of standards management built around this, and it’s not just for big blue-chip companies. Any business can implement a quality management system, and even have it certified to ISO 9001. It does take time and commitment, but it’s a certifiable advantage.
Likewise, if you decide to go for the quality edge of the market, how can you develop your expertise to stand out from the rest? Can you use or explain the latest technology in a way that makes a real difference for your customers? Can you share and promote your knowledge using the media, blogs, wikis, or training sessions?
Communicate your difference
After you’ve picked one of the three, distil your competitive advantage into a few simple words or sentences. Make it sound different from the rest of us, and the advantage is yours.
Come on, spill the beans. What’s your competitive advantage?