How To Discover Your Competitive Advantage
on Friday, January 22, 2021
Did you know that no two tigers have the exact same stripes? While they may appear similar to the naked eye, a tiger’s stripes are just as unique as a human fingerprint. These individualistic animals also tend to live alone, rather than in packs, making each one a strong and unique force to be reckoned with in the wild.
In the business jungle, we can take a note or two from the tiger’s book. In today’s competitive environment, companies that don’t develop their own unique stripes are at risk of getting lost in the herd. Finding your competitive advantage — that unique something that only you can offer — will differentiate you from your rivals and provide a clear and compelling reason for customers to do business with you.
Understanding Competitive Advantage
Harvard Business School professor Michael Porter first introduced the idea of competitive advantage in the 1980s. He identified two basic types of competitive advantage: cost advantage and differentiation advantage.
- Cost Advantage: Providing the same product or service at a lower cost than your competitors
- Differentiation Advantage: Providing a product or service that exceeds the benefits offered by your competitors
An example of a cost advantage approach would be to lower your costs by improving operational efficiencies or reducing operational expenses (e.g., cheaper labor and materials). You could then pass those savings on to your customers to outprice the competition and gain market share.
A differentiation advantage approach might involve using innovation to provide a higher quality product or service or delivering excellent customer service that helps you earn brand recognition.
A true competitive advantage is something your competitors can't replicate. It's unique to you and only you.
Defining Your Competitive Advantage
To find your competitive advantage, you need to know:
- Who your competitors are
- Who your target market is
- What value you provide to your customers
Armed with this knowledge, you can then start evaluating how those factors translate into a competitive advantage. A great place to begin is by conducting a SWOT analysis, where you take a hard look at your strengths, weaknesses, opportunities, and threats. Your strengths and opportunities will help you clarify your competitive advantage(s), while your weaknesses and threats shed light on your disadvantage(s). You should also conduct a SWOT analysis of your top competitors to clearly understand how you stack up against them.
Competitive Advantage Examples
Need some more help to get the ideas flowing? Consider whether any of these strengths apply to you as you conduct your SWOT analysis:
- Expertise: Are you a specialist in something? Do you have exclusive knowledge or skills that your competitors don’t? Perhaps you’re fluent in three different languages, or you have extensive knowledge of a neighborhood. Or maybe you only operate in a niche market, such as the luxury-home market.
- Connections: Your relationships and professional network can also give you a competitive edge. This could mean collaborating with a business partner who shares your mutual client base and sharing resources to deliver a more streamlined customer experience. Or it could simply be a connection to someone with insider information (the legal kind), so you can be the first to know about big changes or opportunities in your market.
- Resources: Do you have access to a lot of capital that can propel you above your rivals? How about special technology, systems, or processes that enable you to deliver faster and more efficiently?
Other ideas to consider:
- Brand Reputation
- Customer Service
- Organizational Culture
- Geographic Location
- Transferable Skills from Past Experience
Communicating Your Competitive Advantage
Once you understand your competitive advantage, it’s important to craft it into a unique selling proposition (USP) that clearly and succinctly tells customers why they should choose you over the competition. Your USP informs how you position yourself in the marketplace and should be consistently communicated across your entire brand, from the messaging on your website to the elevator pitch you use with potential customers.
So, what if you’ve gone through the exercise of completing your SWOT analysis and you still see gaps? Maybe your competitive advantage isn’t as strong as you’d like it to be, or you’re struggling to come up with one that’s truly unique to you. Don’t be discouraged. Use this as an opportunity to expand on your skills, services, or resources to strengthen your competitive advantage or create one that doesn’t exist today. For example, if your goal is to become an influencer and thought leader in your field, consider getting an expert certification in social media marketing. As part of your growth strategy, form a plan to develop strengths that translate into a more robust or brand-new competitive advantage.
It’s a jungle out there, and finding your unique competitive advantage will empower you to excel above your opponents and deliver the value your customers want and need. Make 2021 the year you earn your stripes — literally — and establish yourself as a leader in your market.