Doing one thing really well is not enough to create a sustained competitive advantage.
“From the moment an innovation appears on the market, the movement toward commoditization goes at a rate that has never been seen before,” writes Jean-Marie Dru in The Ways To New.
As soon as you find an advantage your competitors — both direct and indirect — are working hard to nullify it. They copy, duplicate, and build up on it. They take your ideas and claim them as their own.
Competitive advantage is being eroded at an alarming rate, but you can slow it down.
The 9 Brand Differentiators
Competitive advantage can be broken down into distinct building blocks. There are 9 brand differentiators:
- Market Responsiveness: Your company is able to respond to consumer demands quickly, or even anticipate their needs. H&M is the second largest clothing retailer in the world, and they bring designs from the runway to its stores with remarkable speed.
- Product or Service Superiority: Your products and services are definitively better than the competition. Your company sets the standard of quality in its industry.
- Production Efficiency: Your company is a well oiled machine. It invests in production, distribution, and total quality management.
- Natural or Human Resources: A natural advantage could be a prime retail location. A human resource advantage might be a celebrity CEO or an irreplaceable member of your team. Apple had Steve Jobs, for instance.
- Market Dominance: Being #1 or #2 in a category is a competitive advantage. Unseating brands like Coca-Cola or McDonalds would take Herculean effort, and even that may not be enough. Size provides credibility, but also forces competitors to invest disproportionately more in sales and marketing to get similar levels of brand awareness.
- Short Term Profit: Cash in the bank gives your company options. You may not be able to count on a surge in profits for ever, but if you can capture it, take it.
- Method of Sale: Dell transformed the PC industry by cutting out the middlemen. It invested in direct sales channels to increase consumer preference and undercut its competitors with lower prices. Innovations in sales techniques can open up new markets while cutting costs.
- Distribution Methods: Distribution is your company’s ability to get products to your customers. One of Apple’s core advantages is its supply chain. Tesla skipped the need for expensive dealerships, and opened showrooms in malls.
- Technological Advantage: Netflix and Amazon know what you like. Their data scientist have developed remarkable algorithms to give you the content and products you want when you want it. Technological advantage can take many forms, but it’s fundamentally the application of software, hardware, and other intellectual property to improve the efficiency, effectiveness, or reach of the business.
Blend Brand Differentiators to Create a Competitive Advantage
Each brand differentiator is broad, but they consume a lot of resources and expertise to achieve. For example, a company that’s driven by quality and craftsmanship will demonstrate a strength in #2, Product or Service Superiority. Where as a company focused on being a low-cost competitor will gravitate towards #3, Production Efficiency.
The challenge is you can’t be excellent in just one differentiator. Competitive advantage is eroded too quickly. Create a competitive advantage by blending two to four of the 9 brand differentiators.
As a starting point, rank how your company is performing in each of the 9 differentiators:
- Which brand differentiators does the company excel at?
- Which brand differentiators are most important to your customers?
- Where does your company excel compared to its competition?
Make the Brand Differentiators “Strategic Choices”
You may find that your company does not excel in enough of the 9 brand differentiators to create a competitive advantage. That’s ok. You may not have those differentiators today, but you can convert them into objectives.
The 9 brand differentiators are principles. Make them actionable by converting your top two to four differentiators into “strategic choices.”
Express each of your brand differentiators as set of strategic choices. For example, there are different ways to demonstrate product superiority. One may be speed, and the other may be strength. This could be expressed as,
- “We make the fastest cars from zero to sixty in Europe.”
- “We make the longest lasting and most reliable engines.”
By converting your brand differentiators into strategic choices you make the concepts tangible. This is essential for your team. It helps your organization in two distinct areas. First, it helps to focus your company’s resources so that it can serve customers better. Second, it helps you define where to play and how to win in a competitive market place. You can’t be all things to all people, so choose how you play the game.
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