We get it.
Big rewards mean big competition. And that means winning high-value customers time after time is difficult, even if your product’s great.
That advantage you’ve worked so hard to create? Your competitors are working day and night to replicate it, beat it, and take those hard-won customers right out of your hands. 😤
So how do you stop your competitors cloning your strategy? How do you make your competitive advantage sustainable?
Buckle up folks, we’re about to show you how.
Navigate directly to a section here: 👇
- What is a sustainable competitive advantage?
- Identify where you're winning, then make it sustainable.
- Defensive and offensive play.
- Ten examples of sustained competitive advantage.
What is a sustainable competitive advantage?
A sustained competitive advantage is an edge over the competition that lasts. It’s the ability to eat up market share while making it difficult for your competitors to catch up. But the way you defend your advantage and make it sustainable depends on what the source of that competitive advantage is.
Think of these sources as your routes to a superior position in the competitive landscape. Back in the day, that might have meant your trade secrets. Think KFC’s secret blend of 11 herbs and spices. 🐓
But today? Secrets don’t work too well.
With the help of modern technology, and with privacy at an all-time low, your competitors can figure your secrets out. And with an increasing number of competitive intelligence roles and hires, you can bet there’s someone in your rival’s camp beavering away to find what your customers like about you and how they can win your slice of market share.
No, secrets are out. A sustainable advantage is one that’s defensible. And today, secrets are hard to defend.
Identify your advantage, then make it sustainable 🔍
If not secrets, then what?
Well, first you need to know what you’re working with.
Then you have to ask what you’ll do when your competitors clone your strategy.
This is a big deal and the difference between a competitive advantage that can be sustained and one that can’t. If your advantage can be copied or improved upon, then it’s insecure.
On the plus side, you can identify weaknesses in the competitive landscape that you can attack to improve your own competitive position. And a fairly simple framework will get you there.
Let’s run through it before we go further. 👇
Market research and competitive intelligence
The customer comes first. And that remains true when creating a sustainable competitive advantage.
How well your products meet customer needs will always sit at the heart of why you win. But the emotional needs of your customers are diverse. That’s why customer research is vital: you need to know exactly why your customers love you and what you do.
But your products don’t exist in a vacuum. You also have to understand the competitive landscape. That means doing your market research and gathering intelligence on your competitors.
Win/loss analyses and customer interviews are easy first points of call since they check both boxes.
But when it comes to collecting a bunch of data about your competitors and the market at large, there are a number of tools and software you can use to help you (using a bunch of them already? Vote for your favorites in our Tools of Choice survey).
To keep the length of this article under control, we’ll refer you to these lovely resources for more info: 👇
Talking to your customers first is smart since they’ll tell you what your competitors do well and where they’re falling short. So, with the data from your customers in hand, you can turn to your competitors.
A competitive SWOT analysis is the best way to ID their strengths and weaknesses. Then tie your findings back to your own weaknesses and core competencies.
At this point, you’ll already be asking yourself the following questions (which is what makes this practice so good): Can the competitor attack your advantage? How might they do it? How can you defend against these attacks?
The VRIO framework has you examine your firm's internal resources and capabilities as sources of potential competitive advantage. You then rate these resources and capabilities according to each of four factors:
According to the VRIO framework, those that meet all four of the above factors constitute a sutained competitive advantage for the business.
Predictable and unpredictable events
Quick side note: it’s not just the things you can predict that you should do your best to defend against.
If your organization’s profitability depends on your competitive advantage, you’ll want to develop plans for defending against the so-called “unknown unknowns”.
Black swan events are those with a vanishingly small probability of occurring. But, given a large enough time horizon, the probability of them actually occurring at least once becomes huge. If you’re planning on building a brand that sticks around for decades, it pays to create a defensive strategy for handling these extreme events. Otherwise, you risk allowing a possible sustained advantage to degrade into a mere temporary competitive advantage.
Defensive play: carving a defensible competitive niche 🛡
Once you know where you’re winning, you can get to work building a moat around these advantages, stopping imitators in their tracks.
Making your advantages difficult to duplicate often comes down to being willing to do what others aren’t. And the willingness to put in that extra effort often stems from your organization’s founding principles and values.
Once you’re known for being the energy provider that cares about the environment, for example, it’s way more difficult for competitors to convince the market that they occupy that position instead.
But the business that adopts recycled packaging and calls it a competitive advantage? Well, they’ve got the wrong idea.
An edge is hard-won in any competitive endeavor. Everyone goes for the low-hanging fruit, so if you want to dominate the market, you’ll need a plan to target the fruit at the top of the tree too.
You need to build the ladder, climb up there, and then defend the materials you used to build the ladder in the first place.
Offensive play: restricting your rivals’ options ⚔️
Defending your advantages against imitation isn’t the only way to make your competitive advantage sustainable. Actively restricting your competitors’ options is just as effective and, with an idea as to how the competition might attack you, you can start looking for openings in the market you can exploit.
As we’ll discuss, trade deals and patents are excellent ways of doing this. They come with their risks, but if you and all your competitors need the same raw materials for processor chips, and you sign an exclusive contract with the key supplier, you have an unreplicable advantage.
Of all the types of competitive advantage out there, there will be a couple that stand out as most attainable and most defensible for your organization.
But these two principles, of defending your competitive advantages and actively restricting your competitor’s options, are the bedrock for making your competitive advantages sustainable.
Get them right and you’re off to the races. 🏎
Ten examples of a sustainable competitive advantage
So, you need to figure out where you’re winning with your customers, and identify where you sit in the competitive landscape.
Knowing which of your advantages are vulnerable to attack, and where new opportunities might exist, is super valuable.
But what if you’re wondering what a competitive advantage even looks like?
Here are ten examples:
- Executing on innovation
- Flexible products and agile businesses
- Competitive intelligence and (re)positioning
- People: their knowledge, experience, and expertise
- Strength of brand and reputation
- Undercutting: winning on price
- Pricing power
- Economies of scale and production
- Strategic assets
- Access advantages: barriers to entry
1) Executing on innovation
The faster you can innovate the better. When you innovate, you can’t help but stand out. If your product meets customer needs in new and better ways than the competition, then you’ve got a valid competitive advantage.
But there’s a problem.
Innovation is expensive.
True creatives and trailblazers are in high demand for a reason. They’re rare and, when their solutions work, they drive massive demand for your product.
If you get lucky and land one early on in their career, it can completely change the course of your business for the better. But since true innovation is rare, you could be waiting indefinitely for that person to walk through the door.
And poaching someone from another industry or business? Well, if you can’t afford them, then that’s not an option.
But there’s another issue.
Imitation is cheaper and faster than innovation, and innovation is nothing without speed of execution. If you’re going to innovate, you have to be able to execute quickly. If your competitors are able to poach your ideas and execute them faster than you can, then the competitive advantage is theirs.
Making innovation sustainable
It doesn’t have to be an individual who brings the creative juice to what you do. Teams working together can compete here.
Whether it’s a few individuals or a company-wide effort, you need to recognize your creative talent and then work hard to keep them.
After all, if all the creatives are working with you, then they’re not working for your competitors.
2) Flexible products and agile businesses
Flexibility and agility can mean a couple different things, but both make for great competitive advantages that, done right, can be sustainable.
Flexible products, for example, are capable of filling a variety of different customer needs. Or they can fill a single need in a variety of ways, giving many people an enjoyable experience while they have that need met.
Or this could mean being flexible as an organization.
You see this all the time in tech and start-up environments. Every job ad mentions how “fast-moving” the business is. When this is true, it can be a great strategic advantage. As we alluded to before, coming up with great ideas is only part of the puzzle. And if you can’t execute them in time? Well, then those ideas become meaningless.
Making flexibility and agility sustainable
Flexibility and agility are often baked right into an organization's founding values or the product's design principles.
When they’re deep-rooted like this, they’re very sustainable. It’s doing the hard work upfront to establish that kind of company culture or ensuring that the entire product team is working towards the same vision of a flexible product, that’s the challenge.
3) Competitive intelligence and (re)positioning
Through competitive intelligence programs, an organization can react to competitor developments and position itself, its brand, and its products to cancel them out as soon as they arise.
This is a very marketing-specific version of business agility. It requires an active approach to competitive intelligence and cross-functional buy-in to execute quickly on that intel.
Done right, your competitors will feel like they’re playing chess against a grandmaster with an answer for all their best moves.
Where this sits on the offensive-defensive spectrum is interesting. For one, it’s reactive. Rather than defending a competitive advantage you’ve established, or cutting off an option for a competitor before they can get to it, you’re neutralizing their advantages as soon as you notice them.
Making marketing and competitive intelligence strategies sustainable
Like many of the advantages here, it’s the groundwork you lay early on that sets the course for sustainability. If competitive intelligence is top-of-mind for everyone in the organization, you’ll never lack intel, and decision-makers will release budget to invest in automation tools to help gather that intel.
And when it comes to repositioning, it has to be done quickly. That means you need a strong team with the experience to build a plan and execute it.
• A beginner's guide to the positioning matrix
4) People: their knowledge, experience, and expertise
The benefit of a great team can’t be overstated.
If you’ve got the best team in the industry, you can’t help but have a competitive advantage. You’ll create a better product, bring it to market more effectively, track metrics more accurately, and make improvements faster.
Making expertise sustainable
The key to making all this sustainable? SOPs.
SOPs, or standard operating procedures, are centralized documents, frameworks, and cheat sheets outlining best practices. They make knowledge replicable across the organization, ensuring your results aren’t dependent on the enlightened few.
If you make sure that your people are documenting their knowledge in centralized resources, their expertise becomes the organization’s expertise. If a member of your team moves on, you minimize the impact of that loss and continue to benefit from their knowledge.
5) Strength of brand & reputation
When you cultivate a strong brand and reputation, the payoff can be huge.
Double down on doing a few things so well no one can hope to compete. Succeed and you’ll establish strong customer loyalty and brand advocates who spread the word of your greatness, eating up mind-share from other competitors.
Rock-solid customer service is a great place to start. It’s cheap to implement and the only real requirement is that you hire well and in abundance (overstretched staff will always struggle to deliver, no matter how good their intentions).
Making brand reputation sustainable
It takes time and investment, with a commitment to excellence, to cultivate a strong reputation, a strong brand, or a superior product.
But once you’re known for delivering a great customer experience time after time, your customers will find it difficult to look the other way. Even lower prices, unbeatable offers, and strong promises lose their shine when competing against a trusted and established brand.
6) Undercutting: Winning on price
While competing purely on price is not a sustainable strategy, the ability to strategically undercut your competitors can still help you win.
When you compete purely on price, you eat into your profit margins and communicate to customers that your product is a commodity with little differentiated value. Any organization that’s better positioned to take advantage of economies of scale can beat you.
But when you’re that well-positioned entity, able to offer terrific value at low cost to your customers because of economies of scale, secured deals with suppliers, or other strategic advantages, then cost advantage becomes another tool in your arsenal.
Making cost-advantage sustainable
You don’t have to offer the lowest-cost product to offer a competitive price.
In the marketplace, value wins. So even if your product is expensive, so long as you’re offering massive value for that price, customers will still think they’re getting a great deal. And the allure of an unbeatable offer is sure to offer you a competitive advantage.
7) Pricing power
Pricing power has nothing to do with offering the same service at a lower cost. An organization with pricing power is one that can increase its prices without losing customers.
This is almost always a direct result of having one of the other competitive advantages discussed here, but it’s also a competitive advantage in and of itself.
With pricing power, you can increase your profit margins with no consequences. Then, you get to put the extra profit to work by investing in your staff, in your product, in your marketing and messaging, or in securing better business relationships with suppliers.
All of these give you options for defending your advantages from competitors.
Making pricing power sustainable
Pricing power is pretty magical in that you’ve already laid the groundwork for it elsewhere to make it possible.
When your brand is strong enough that people will pay more just for you, then you have pricing power. Turn the crank, reinvest the profits, and ride the positive feedback spiral to the end.
8) Economies of scale and production
This one’s huge.
Improvements to production processes improve product margins and make possible economies of scale. It was his approach to production (though innovation had a huge part to play) that made Henry Ford his fortune.
“With a mass market for automobiles, it paid to invest in expensive but labor-saving mass production machinery, whose cost per car would turn out to be modest when spread out over a huge number of automobiles.”
Thomas Sowell, Basic Economics.
The key here is “if there were only half as many cars sold as expected, then the cost of that machinery per car would be twice as much.”
Making economies of scale sustainable
Economies of scale rely on mass markets. And the competitive advantage that comes with them relies on the infrastructure your organization builds to produce a product or service on that massive scale. And once that infrastructure is in place you’ll reap the rewards so long as you maintain it.
Depending on the market size, there may or may not be room for more than one entity operating at that kind of scale. If there is, you might have to employ one of the other advantages outlined here.
9) Strategic assets
You can use your business’ strategic assets to defend your intellectual property and to protect your strategic advantages from competitor poaching.
Patents, trademarks, and copyrights, are all examples of such strategic assets. But any company asset, attribute, or ability your competitors can’t imitate will provide a superior long-term position for you and your organization.
Making strategic assets sustainable
The great thing about these is that they’re sustainable in and of themselves. If you have the rights to the very thing that make a particular product design desirable, others can imitate as hard as they want - they’ll never manage to fill that customer need as well as you can.
10) Access advantages: barriers to entry
Access advantages create barriers to entry others must overcome before they can compete.
Here’s an example:
Perhaps you have family connections to a chain of mining facilities. Many of these facilities mine copper, gold, and other raw materials used in technology and engineering.
If you were to go into either of these industries, you could use your family connections to secure unbeatable prices on the raw materials. Then, you could pass those savings onto the customer and compete strongly on price, or you could retain the higher profits, re-invest in R&D, and create a superior product people are willing to pay even more for.
Making access advantages sustainable
Much like strategic company assets, like patents and copyrights, access advantages are self-sustaining. In fact, an access advantage often stems from a strategic asset.
For example, a ten-year contract for coffee beans at a rock-bottom price. One that blocks your competitors from ever getting as good a price from this supplier.
The issues with access advantages
Access advantages are tricky though.
If they’re to give you a sustainable competitive advantage, you have to be able to enforce them. Otherwise, competitors will strike up similar deals and nullify your advantage.
You also have to get in early. This kind of “first-mover advantage” is great to have, but you’re out of luck if you’re late to the party. But, as we’ve mentioned, imitating is both quicker and cheaper than innovating, so options exist for those who aren’t first-in.
And, if you lock in terms for the long haul only for better terms to become available down the line, you’ll be stuck with worse terms than your competitors. They’ll then eat up the new and improved access advantage.
Remember: a competitive advantage always comes back to the customer. The strength of your advantage directly ties to the value you offer your customers above and beyond what they would get from your competitors.
Where that value comes from, its source, is what you want to defend. At the same time, you can work to cut off the avenues your competitors might take to establish a stronger competitive advantage.
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