A colleague recently posed an intriguing question, “Do you really need a competitive advantage?” The answer may surprise you: No, under certain circumstances. Thousands, if not millions, of look-alike companies are making decent returns, with some even experiencing impressive growth. Various factors contribute to their success.
Sometimes supply and demand favors them, sometimes they benefit from lousy competition, and sometimes it is simple geography. At times a competitive advantage is not needed if one is selling the right product at the right time in the right market. However, these scenarios rarely last for extended periods.
Many business owners have sufficiently met their “wealth” goals, so additional focus on investing in having differentiation and touting competitive advantages is icing they are happy to leave off of the cake. It takes a little more effort but leaving money on the table is acceptable.
Having a competitive advantage is for those who want to “win” in the game of growth and maximize profitability. It is for those who want insurance in down markets. It is for those who want to build a company that will leave a legacy. Not everyone builds companies for those reasons. Some want “enough” to warrant a decent income followed by a profitable sale one day. There is nothing wrong with that approach. It has made millions for many.
Experience has shown that only about 5-10% of business owners and leaders want to do what it takes to reach consistently higher levels. A comparable adage comes to mind:
“I want to be lean and strong, but can I do it without going to the gym or watching what I eat? To what extent am I willing to invest for the desired outcome? After all, I am okay; not sick, and strong enough.”
Yes, we could be better, but many have accepted “good enough” health, as many business owners have accepted being “good enough” for business results. There is no issue with that.
However, uncovering and conveying competitive advantages, as it turns out, is not as difficult as three to five gym workouts a week. Additionally, competitive advantage results are long lasting once the initial workout is completed. The payoff is both rewarding and sustainable through downturns while maximizing returns during the up-market trends.
Embracing “good enough” is a strategic decision. There are benefits; less pressure may lessen employee turnover; and some think it provides more life/family balance.
However, a well-defined competitive advantage can also foster employee pride and retention and make closing sales much easier. It can achieve lifestyle balance sooner rather than later. It leads to market leadership, legacy building, and higher valuations.
It is not a difficult task, and the ROI is always more than anticipated. Ask Warren Buffet who said competitive advantage was” the single most important thing” he looked for in a business.
July, 2024