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What Is Your Competitive Advantage?

What Is Your Competitive Advantage?

“If you're not making mistakes, you're not taking risks, and that means you're not going anywhere. The key is to make mistakes faster than the competition, so you have more changes to learn and win.” – John Holt

What is competition? How do people define what they compete for and why? As a consumer, how do you select which brand to buy versus another? What conditions are necessary for brands to have a competitive advantage?

In terms of biology, ecology and sociology, competition is a “contest between organisms, animals, individuals, groups, etc., for territory, a niche, or a location for resources and goods, mates, prestige, recognition, awards, social status, or for leadership.” In other words, this is how the human world defines the worth of anything.

If you observe human behavior, the scarcer something is, the more people want to compete for it. It is natural for people to compete to earn something valuable and rare. But the question is not what it is we are competing for, but why? What makes one product more precious than another?

What Are The Types of Competitive Advantage?

In any industry, there are four ways to have a competitive advantage.

  1. Cost leadership strategy - Products or services offered compete for lowest price
  2. Differentiation strategy - To be the first of its kind
  3. Innovation strategy - To be better than the first, second, third … and be the best so no one else can match up
  4. Operational effectiveness strategy - You perform business activities efficiently and make it fun to work with your company so that others want to keep doing business with you

The first one is most common for retails and marketplaces like Walmart that offers the lowest price. For the second strategy of uniqueness is Amazon. It was launched in 1995 as the first business online retail market. It established its brand well and has developed a huge loyal following.

Best example for the third type is Google that emerged on top beating out its predecessors like AltaVista, Lycos and even Yahoo as the primary Search Engine. Another great example is Apple for creating products like Ipod, Ipad, and Iphones. The fourth one should be a strategy done by all companies to make it enjoyable for other businesses to collaborate with you.

What Conditions Makes the Second Strategy Advantageous?

Being the first means you have no competition and can be the market leader because there is no one else. The first tend to be well recognized in history for being the first. They can secure the best locations, employees to hire and vendors to partner up with all for being the first.

However, this second strategy only lasts if the market is static, there is no one else and nothing changes. Obvious disadvantage to this strategy is that everything changes and new ones will always come up. The solution to the second strategy’s weakness is to follow the third strategy.

What Conditions Makes the Third Strategy Advantageous?

A company must always be an innovator unless they want others to eventually catch up to them. And that is exactly what Google did. Google built a search engine that is not only the simplest website interface in the world, but also the most cutting-edge technology to index websites that ever existed. Google stayed true to its simple interface and added more awesome gadgets like Gmail, Google Plus, Hangouts, Google Docs, etc. over the years.

In other words, the third strategy’s main advantage is to be able to learn from the mistakes made by its predecessors and avoid them. The second strategy’s strength is also its weakness because there are no proven customers and it is hard to get it right the first time. While the third’s main benefit is to go with the flow and follows change.

Third strategy’s other advantages are to avoid bad investments, sunk cost, risky mistakes, bad processes and use of less efficient technologies made by the second strategy. The third’s inner core is “timing is everything”. The right time to emerge is when the processes are established, there is a known market, and contains lesser risks. It is a balancing act of knowing when to keep learning and when to deliver new innovations.

What does improving mean to you? If the first one stops changing and improving, it will only be for a short while before a new one begins. Instead of waiting for a new one to unexpectedly show up, why not create changes and improvements yourself so in a way you will always be the first and best of all?

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