Understanding Your Competitive Advantage
Do you really understand your competition?
OK, this month it is back to my series I call the “Framework of Business Development”. We are going to discuss your Competitive Advantage. The real key to long term success comes from understanding the various components of your business as well as possible, and better than your competition: Problem Definition, Solution Definition, Opportunity/Market, Competitive Advantage, Business Model, Culture/People/Structure, and your Business/Financial Plan.
Learning to move from making assumptions to building a plan based on verified and reasonable assumptions is a difficult step. Understanding your real competitive advantage is most important to developing your ultimate customer loyalty programs.
Let’s start with a basic truth, there are most likely others trying to do what you are doing. You may not know about them, but who really knows about you right now? Although you may have some unique, even proprietary, portions of your product/service, your overall solution must contain components that your competitors already provide. Another truth? You have competition, if you don’t think so you better read on and then do some research. Finally, there is more to your competitive advantage than your product/service.
The key attributes of defining your Competitive Advantage are: Why you? Who is your competition, really? What makes your solution “the one”? What does the customer care about? What are your key competitive differentiators? Let’s look at each of these.
From an investor’s perspective one of your key attributes as an attractive investment is you and your team. Understanding your advantages, and disadvantages, could be key competitive differentiators. I recently met with a company whose owner helped develop the technology he was selling for a very large international company. That got my attention from a qualification perspective. But the team’s qualifications themselves are only a part of the competitive advantage you and those around you may have. What really drove you to this particular business? Was there something in your lives, or a passion you have developed, that lead to this business or market? If so those things must be defined and taken advantage of accordingly. Defining them is the easy part, they are your “why”. But defining them in terms that benefit your business through your marketing plan by pulling the right heart-strings in clients is the real key.
OK, if you have defined a real problem, then there has to be others trying to solve that problem. It is the rare business that has found a problem no one else is addressing. Even if they are trying to solve the problem in a totally different manner, if people are taking money out of their pockets for these other products/services to solve that problem, they are your competition. Alcohol and iced tea compete with each other at my family’s dinner table. Is Smirnoff’s a competitor of Nestle’s? At some level both companies have discussions about that, why do you think both started putting various flavors in their beverages? Understanding this fact, and who your competition really is, can be the difference between success and bankruptcy.
If you really understand your competition, the last three attributes come down to defining this: What’s your secret sauce? Is it some feature of your solution? A particular way the customer interacts, derives satisfaction or resolves their problem/fulfills a need with your product/service compared to your competition? Is it intellectual property, either a trademark or patent? Be careful with the real answer to that question (see my blog on your Solution).
How you go about defining your secret sauce has three major facets: your perception, the market’s perception, and your analysis of the two. The first comes down to defining what values your solution brings to the marketplace and what exists to protect your solution (intellectual property) from the perspective of your vision and mission statements. The second comes down to an honest understanding of what key features of any solution the people with the problem being solved truly care most about. This is from your prospective customers point of view, not yours. I don’t drink vodka, pretty simple…but I am very picky about my iced tea. Why I am picky is what those selling iced tea need to figure out. Making assumptions without validating them about why I am picky is what kills many businesses. Finally, there are the various features that are basic to any solution to the problem being addressed. The shape of the bottle or sizes sold, for examples.
The best way to summarize the information above is in a matrix format. All of the key attributes (be honest) go on one axis. You and your competition (everyone solving the problem) go on the other axis. The matrix may be filled with check marks, words, numbers, whatever best describes the feature and its value to solving the problem. The matrix does not have to be lengthy, and you do not have to be the best in every feature shown…being honest to yourself is the most important end result.
Once you have your matrix, you now know your real secret sauces, where you have some work to do, and more importantly where your real competition stands in your way.
Your challenge this month is to start the process of really understanding your competitive advantages.
Mitchell Bolnick – The Excel Consulting Group