Grow Your Business: With Competitive Advantage
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While you are waiting for COVID to retreat into history, take the time to step back, review your business and develop ways for gaining competitive advantage by taking your business to the next level.
There are at least two forms of strategy to help you gain competitive advantage. They are ‘competing’ and market ‘creating’ strategies. In a recent article, authors Kim and Mauborgne of the Harvard Business Review provided some insights on achieving growth in a downturn. They also just happen to be the authors of the best selling book Blue Ocean Strategy which will be obvious as to which strategic side they take when discussing competitive strategy.
A market competing strategy concentrates on gaining competitive advantage over rivals in an existing market. The authors have dubbed this as a “red ocean strategy.” In the case of a market competing strategy, the authors point out that everyone seems to achieve growth, when the economy is growing or cycling up.
The second form of strategy is called a market creating strategy, which is intent on creating new markets. The authors called this a “blue ocean strategy.” They feel “Adverse economic conditions only magnify the growth edge attached to market-creating moves, because when the economy is in a downturn, there is a natural flight to value…people become far more selective about the products and services they choose to buy and those they stop purchasing.”
Interestingly enough, they go on to say “In our research over the past 30 years, we found that while both types of strategy play a role, when it comes to growth resilience, blue ocean market-creating moves stand out. They not only unlock a growth edge when economic conditions are favorable, they also generate realities to growth in the face of business cycle downturns and unfavorable economic conditions.” One of the key components as a result of this particular form of strategy is the creation of new customers.
Kim and Mauborgne suggest four ways to achieve business growth during ever changing market cycles:
- In order to sustain growth, your company needs to be balanced in the usage of market-creation and market-competing strategies; “Market-competing moves generate today’s cash; market-creating moves ensure tomorrow’s growth. Relying on market competing moves alone….won’t build resilience across the business cycle. It will hold you hostage to swings in the business cycle.” they said.
- Time is of the essence in developing your growth strategy. The authors suggest acting sooner, rather than later, will benefit your business in the long run. Planning a market-creation strategy in advance of a down cycle, can help.
- Make sure your market-creation approach is in alignment with your overall company strategy. Also, determine who will be responsible for the new strategy. The authors comment that responsibility “sets an important tone, driven from the top, that market creation in front and center to your company’s future.”
- “Technology itself doesn’t create new markets. The use of technology does.”, they said. Irrespective of whether your company is a ‘technology company’ or not, if the use of technology for your business results in the creation of value for your customers/clients, you have created an innovative edge that will cause customers to choose your firm over the competition.
Most business plans contain a section on an analysis of the competition. Typically, the analysis takes the form of a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats). The purpose of the analysis is to provide your company with a specific set of advantages, help identify the barriers that can be developed to prevent your competition from entering a particular market, and exploit any weaknesses that exist in their product/service line or identify any weaknesses in your product or service line.
Here are some key questions you should be asking as part of determining your competitive advantage:
-What is the reason my company needs or wants to be more competitive?
-Can my company compete in the market?
-If my company competes in the market, can we gain an advantage?
-Can we influence the customer to buy?
-Will our effort be profitable?
-Once we gain our competitive position, can we maintain it?
-Will there be future revenue we can gain from this strategy?
As the authors said, the key in competitive advantage is maintaining the balance between the ‘competing’ and ‘creating’ aspects of your strategy. Consider keeping these approaches in mind as you continue to develop a plan for growing your business.