But for an entrepreneur, it's a must. Ask Jack Welsh, who said, "If you don't have a competitive advantage, don't compete." Whether you can provide the same goods for less, add more value than competitors at the same price, or offer something that rivals can't get, the competitive advantage is a natural reason for your customers to do business with you and not someone else.
However, finding yours can be tricky, according to a new white paper from the Long School of Marketing. Some companies take years to identify what truly makes them stand out, and until you do, you can't nurture the advantage or even effectively use it in marketing because you won't know it exists.
Dr. George Panagiotou, director of academic and quality compliance at the school, suggests a mix of analytic approaches and tools to determine your unique competitive advantage:
Looking at strengths, weaknesses, opportunities, and threats laid out on a grid has become a standard tool in business. Undertaking a SWOT analysis forces you to methodically consider what internal and external factors could help or hinder you. The approach can lead to superficial results, as people can too quickly list factors off the tops of their heads and encourage a checklist mentality toward addressing them. However, it is still useful to understand as the start of a fuller analysis.
Five Forces model
Another approach is the Five Forces model. It's more outwardly focused on, as you might expect, five factors:
1. Threat of new entrants--This is the ease with which new competitors could enter your space.
2. Threat of substitute products or services--Your ability to compete depends in part on how readily customers could bypass you with other options.
3. Bargaining power of customers--The more competition in a market, or the bigger and more powerful the customer, the more room either has to make demands about terms and pricing.
4. Bargaining power of suppliers--Similar to the previous factor, it considers how much relative power suppliers have to set prices and conditions for doing business.
5. Intensity of competitive rivalry--How intently others operate in your space affects your current standing.
The Five Forces model helps build a more thorough view of the context in which your company operates.
Telescopic Observations framework
Dr. Panagiotou helped develop this technique as a way to get a richer and deeper view of the company. It allows executives to "address diverse areas of an organization's environment and integrate key information in one single document." You use two different matrices to gather information and then filter and consolidate it. The forms are a little complex, so the best thing to do is to read a paper on the tool.
By gathering and prioritizing the information, you get a more detailed contextual look at your company, and the approach can work with both SWOT and Five Forces.
Not to get lost in the details of analytic frameworks, the main point to remember is that it's a mistake to assume your existing or potential competitive advantage is obvious. You'll need to put in work to see what makes enough difference in how you run your business and the attraction you have for customers. Find a natural competitive advantage and you have a powerful ally in expanding your company.