what is a competitive advantage?
A competitive advantage is when you have a desired offering that is superior to the alternatives available. This offering can acquire competitive advantages from many different forms, mainly through lower cost or higher value.
what are the different types of competitive advantages?
Being competitive in a marketplace can stem from either being able to create products and deliver services at the lowest cost (comparative advantage) or by having the ability to create products and deliver services at higher rate (absolute advantage).
- Choose a comparative advantage if you can specialise more than your competitors at a lower cost and sell at a better margin
- Choose a comparative advantage if your key resources can be sourced and developed at a lower cost to your competition
If your business demands a higher price and are a specialist in what you do, you have a comparative advantage.
- Choose an absolute advantage if you have the resources to create more than your competition at a quicker rate
- Choose an absolute advantage if your customers are price sensitive
If your business model is based upon high volume/low margin sales, you have an absolute advantage.
where to start with creating a competitive advantage?
Choosing your competitive advantage is the cornerstone of your business strategy and should be reinforced in all of your activities. Think of business activities as touch points that your customers will experience and engage with.
A business strategy is simply a set of choices that decide the direction of your business and therefore, making the right choices is mission critical to achieving long term success.
Making good choices is the key to unlocking your competitive advantage. To do this consider a process called design thinking.
how can design thinking unlock competitive advantages?
Design thinking is a process that allows you to make choices based on a number of internal and external factors that wouldn’t normally be considered in the decision making of a creating a business strategy.
This type of ‘outside the box’ thinking can help businesses design new products and services that go beyond the typical transaction and offer more value through an understanding of customer assumptions, behaviours and challenges.
Design thinking is a powerful methodology that you can use to gain a deeper understanding of your customers and improve their experience. It’s an ongoing process that doesn’t happen overnight but by sticking with it, you’ll be able to create new services that meet the unmet and unarticulated needs that your target market is currently experiencing. This is where you gain a competitive advantage.
what steps can I take to improve my competitive advantages?
The following steps provide an introduction into a new way of thinking about customer problems to help you gain insights that allow you to create new products and services, that then become your competitive advantage:
- Discover - find out about your target market and ‘personas’
- Opportunity - identify the common problems from patterns of behaviour
- Ideate - discuss ideas on how to solve problems
- Action - create something that addresses this problem and is the solution
- Repeat - learn from the experience and include what you’ve learnt going forward
what is the link between creative problem solving and competitive advantages?
Solving the unmet and unarticulated needs of your target market is what will give you a competitive advantage. These needs are not communicated for a reason and it’s because they are difficult to uncover, not easily given away by those who experience them and many more. Creative problem solving can uncover these needs through approaches like design thinking by looking at it from the customer's point of view, using empathy and logic reasoning to draw out those hard to find problems they experience.
why is it important to have a competitive advantage?
Competitive advantages will be what continues to drive growth for your business and make it financially sustainable for the long term. They can help you achieve the business goals and work towards achieving the overall business vision.
where can I find out more about competitive advantages?
If you’d like to know more about creating competitive advantages for your business, we recommend reading up on design thinking and if you want to take it step further, speak with us about our PICE workshops.