The world is changing rapidly and eroding companies’ Competitive Advantages (CAs). What are you doing about it?
A Competitive Advantage is the reason customers choose your offerings rather than your peers’ or are willing to pay you a premium price. (As a professor of strategy/public policy, it’s an area of specialty.)
A few examples may help you. Think of Apple’s iPhone. Apple started with a unique operating system, multiple features (e.g., phone, text, music & podcasts, cameras, etc.) to excite customers, powerful design, packaging, service, etc. Most importantly, it had the resources to continue investing in it and expand its value through its other services (e.g., playlist, AppleTV, etc.) As Apple increased its value year-after-year, customers stayed loyal to it, and new customers joined because of the brand value.
Warren Buffet calls that a Moat – because the “castle” is hard to breach.
Uber offered an alternative to taxis and black car services, through its service-excellence-platform. While other companies tried to compete, they’re consistent ability to stay ahead with useful service, provides them with an ongoing CA.
Unfortunately, few small and midsize companies have the ingenuously creative strategies, meticulous selection of dedicated customer-groups and/or the resources to build such moats.
And it’s getting harder to maintain an advantage. Through M&A and private equity investments, firms can raise funds to imitate, underprice other companies and destroy what they thought were moats. AI will only make it easier for them.
Consolidations reduce the opportunities for smaller companies to have strong CAs. The Wilshire 5000 once included over 7500 public companies. Now there are 3400-3600. One local CEO with whom I work noted that when he started his company there were 40 companies like his; 5 years ago it was 12; now it’s 4. Another business lost its largest client who now will use Ai to do much of what they provided for decades!
In such a world of giant companies, is your company’s CA eroding? To paraphrase Mike Campbell in Hemingway’s “The Sun Also Rises”, remember that it erodes: gradually and then suddenly.
We see this when clients show sales pitches and/or websites that they think are demonstrating their CAs, when in fact all they do is present what today is no more than table-stakes for companies in the industry!
McKinsey recently identified 5 rules to maximize CA:
- Develop a granular view of what customers truly want from products and services
- Tailor the advantage to each market
- Don’t overinvest in areas that won’t improve the competitive position of key products/services
- Boost return on CA by embedding it into strategic decision-making
- Track metrics that can signal changes in the competitive landscape
Now is the time to join a peer-drive, leader development firm, like Vistage Worldwide where leaders get fresh perspectives and share new approaches to how their companies can avoid erosion. That’s why its 45,000 member companies grow 2.2X faster than competitors and stay in business 4X longer.
How would working with other CEOs improve your strategic decision-making for your company? How can you use their insights and experience-based approaches to help you develop stronger CAs consisting of sellable products and powerful services to keep one step ahead of your competition? Share with us how you’re taking on the challenge … while you still have the opportunity.