The creation of new and sustainable customer value needs to be hard-wired into every business plan so that competitive advantage is not only found but maintained. By TOM McKASKILL
By Tom McKaskill
The creation of new and sustainable customer value needs to be hard-wired into every business plan so that competitive advantage is not only found but maintained.
While it may seem that I am preaching to the converted, we often forget just how important competitive advantage is and how critical it is to sustain this over time to achieve growth momentum.
Unless you want to exist in a stagnant state where you are frustrated in your attempts to gain market traction and you face a future of slow death, you need to find some dimension in your product or service offering that has greater appeal to a segment of the market than your competitors.
In the end, competitive advantage is the only game in town.
However, you need to be careful not to become mesmerised by a single dimension of competition. Too often suppliers focus on product or service specification without taking into account that customers value many more aspects of product or service experience than simply solving the targeted problem.
By taking a holistic approach to the customer’s needs, other dimensions of value can be tapped into and the commodity supplier can move to a differentiated higher margin offering.
Markets are simply not homogeneous. When you break the buying and usage process down into stages and impact, you can choose parts of the product and service delivery where you can make a difference and move away from your competitors, even with a commoditised product or service.
In the end, providing outstanding information for product evaluation, better availability, a more interesting shopping or usage environment, easier payment terms, better packaging, environmental support, easier upgrades or maintenance or lower risk in usage are simply other dimensions of the customer experience, to name just a few.
Some suppliers establish competitive advantage through strong intellectual property protection, while others focus on deep expertise to make a difference. But there is nothing stopping any supplier from spending time with their targeted customers finding out how they can improve their value proposition and where they can make a difference compared to competing products.
A competitive difference should be driven by supplier creativity and market evidence. The aim should be to discover areas of need that are unmet by competitors, and to bring forward products and services that tap into that market gap. Only by moving away from competitors and meeting a different need can the supplier improve their price position and margin.
The next challenge is to put this on a sustainable basis.
Clearly the regulated IP protection afforded by patents, trademarks, copyright and licenses help, but the supplier should look beyond these to other forms of protection. Customer entanglement, loyalty schemes, long term service contracts, control over distribution channels and supplier inputs can all help shore up a longer term position.
The supplier then needs to build an internal process of continuous renewal of competitive advantage and sustainability. Any competitive advantage at a single point in time will ultimately be eroded by new inventions, new entrants and expired IP rights. The smart business builds innovation and the creation of new customer value into their DNA so that competitive advantage can be sustained.
Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.
Smart Company is the leading online publication in Australia for free news, information and resources catering to Australia’s entrepreneurs, small and medium business owners and business managers.
