When Scott McNealy started Sun Microsystems some time ago now he did not copy incumbents in his industry. In fact, when asked why he wasn’t doing the same as IBM or Microsoft, he said something like “If I do that I won’t have a business”. This from the man who confused the world with “the network is the computer” many years before it really became a reality. Mr McNealy understood that true sustainable success is built upon differences that are valuable to customers.
Businesses have many apparent sources of difference that give them a Competitive Advantage in the market. Something that is sufficiently compelling at the end of the day to persuade people to buy from them rather than their competitors.
Some companies have history, scale and assets on their side. They may have a licence that limits competition for a period of time, like a mobile phone company, or a patent on a drug, or they may own a famous brand and building like Harrods. You may or may not have such assets, but even these companies also have to rely on the three sources of competitive advantage that most have to work with.
For most of us there are only three sources of Competitive Advantage:
- Tacit Knowledge – stuff you or your business knows about because it has been involved in a certain activity or market for a long time. This knowledge is unlikely to be written down, but it will exist in the “collective consciousness” of the business.
- Relationships – you will have many relationships and some of these can be very useful to you in achieving your aims.
- How You Are Organised – some forms of organisation can make you less competitive, others more so and this is particularly important in a rapidly changing global market place.
These three things are deceptively simple sources of very powerful competitive advantage, but from working with many businesses over the years it is clear that most people find this idea very hard to apply to their own businesses. Most people need help to really understand this and to identify their own, something which is central to sustainable business success.
So what is the source of your Competitive Advantage? If you still don’t know, your business will really benefit from some help in working this out.
Next time I’ll consider how best to leverage your competitive advantage to make the most of your business.
Bye for now