Competitive advantage

Without a real advantage, a business competes on price alone, and margins shrink. With one, positioning, product investment and effort can focus on the one or two things the business wins on, instead of spreading across everything a competitor also does well. Advantages also fade as rivals catch up, so knowing which one is real, and for how long, shapes strategy.

• Study a handful of direct competitors: product, marketing and pricing. Note what is common to all of them, since that is not an advantage.
• Interview customers who chose the business over a rival and ask what decided it. The answer often differs from what marketing assumed.
• Test each candidate honestly: could a competitor copy this within a year, and what would it cost?
• Build the advantage into the product and the positioning, not only into a line on a slide.
• Review it every year, and shift focus before the market notices an advantage has faded.

An advantage is a reason customers choose one business over another that cannot be matched quickly. The classic sources are lower cost, a clearly better or different product, a position in a niche that others ignore, and assets that are hard to replicate, such as a trusted brand, proprietary data, exclusive relationships or a community. A nicer website or friendly support is usually not an advantage, since competitors can match it within weeks.

The test is defensibility. If a rival could match it with a cheque or a redesign, it was never a durable advantage.

• Naming something every competitor does as an advantage, such as good support or integrations.
• Claiming an advantage customers never mentioned. Check against why people actually chose you.
• Stating several advantages. Customers remember one or two.
• Assuming an advantage lasts. Review it every year and move before it fades.
• Confusing a feature with an advantage. A feature can be copied in weeks, while a cost position, data or trusted brand takes years.