Veechi Curtis - Small Business for Dummies

Understanding the relationship between risk and gain

Analysing your competitors (complete with cloak and dagger)

Matching competitive strategy to strategic advantage

What is it that makes you, or your business, so special?

Even if you have a business that’s similar to thousands of others — maybe you mow lawns, have a hairdressing salon or tutor high school students — I still recommend you come up with an idea that makes your business different from others in some way, or that provides you with a competitive edge.

Similarly, if your business caters for a very specific niche — maybe you sell gluten-free cookies or baby clothes made from organic cottons — you need to identify what it is about your skills or circumstances that enables you to service this niche better than others.

In this chapter, I help you define the essence of what makes your business special, or more likely to succeed than others. This quality is called your strategic advantage and is the single most important ingredient for ongoing business success.

Many business people use the terms competitive advantage and strategic advantage synonymously. However, to be really precise, you could argue that these two terms relate to slightly different aspects of your business.

A competitive advantage is something that’s different from, better than, or not offered by your competitors. For example, if a town has two hairdressing salons and one offers a mobile service but the other doesn’t, the first salon has a competitive advantage because they’re providing something their competitors aren’t.

A strategic advantage is something that stems from capabilities within your business that are hard for others to copy. These capabilities tend to be a unique blend of assets, knowledge, people networks, skills or technology. For example, imagine the owner of the salon with the mobile haircutting service has a background in nursing, and so has a natural understanding of the needs of her many elderly housebound clients. Imagine also that the owner’s husband is a mechanic, which means the vehicle used for providing the salon’s mobile service is kept on the road at minimal cost. This unique blend of skills and cost efficiency forms part of this salon’s strategic advantage.

Having said all this, competitive and strategic advantages tend to overlap so much that I try to avoid getting bogged down in arguing about the distinction. I use the term strategic advantage in most of this chapter (because, after all, a true strategic advantage should ultimately result in a competitive advantage — an idea I return to at the end of this chapter) but if you’d rather use the term competitive advantage, that’s just fine.

How can your business beat the competition, and what benefits can you provide that the competition can’t? Here are some ways that your business may be able to secure a strategic advantage against others in the same industry:

Added value: Can you offer added value in comparison to your competitors? Think 24-hour delivery, locally sourced product, a mobile service, or a quality of product or service that’s beyond industry norms.

Exclusive distribution rights: Do you have exclusive distribution rights to a sought-after product or service?

First cab off the rank: Do you have a new idea that nobody else has tried before? Or a new way of doing something that makes the product or service better, quicker or cheaper?

Intellectual property: Do you have unique intellectual property (IP) that customers want and that’s hard to copy? IP includes copyright, patents and trademarks. If you’re just getting started with your business, your IP could be as simple as a clever business name, an eye-catching logo or a well-chosen domain name (that is, a web address).

Location: If you’re a retailer, do you have a great location in a central shopping area? (Location is often the prime strategic advantage for retailers.) Or are you the only business providing a service in a particular suburb or region? Are the demographics of your location ideally matched to your business, or are you located in a central spot for freight and transport?

Lower costs: Do you have an innovative way of doing things that reduces costs, creates economies of scale or significantly improves business processes?

Obsession and drive: Do you have exceptional vision or drive? Is this drive connected with a particular obsession? (For example, think of Steve Jobs and his obsession about design.)

Perfectly matched team: If you’re in a business partnership of some kind, do you have a unique combination of skills and do you work well together as a team? (The synergy created by two or more people who have complementary skills and who work well together can be a force to be reckoned with, and something that’s hard for competition to copy.)

Specialist skills: Are you a specialist who has an insight into a particular industry that nobody else is likely to have? Maybe you can see a gap in the industry that nobody else is catering to, or maybe you can see a way to do something better.

Think of a business that you know that has been really successful (maybe a local business or a friend’s business, or even a big name such as The Body Shop, McDonald’s or Microsoft). Go through the list of different strategic advantages and think about which of these advantages could apply to these businesses.

Try to deepen your understanding of strategic advantage (refer to the preceding section) by applying the concept to a few real-life situations that are easy to imagine. Picture yourself sitting in a room with four people and each of these people sharing their idea for a new business:

Leila plans to start a business mowing lawns in her local neighbourhood.

Tess has recently qualified as an acupuncturist and plans to start up a practice specialising in children’s health.

Dave has an idea to provide a mobile home-safety service, installing devices such as gates, cupboard latches and electrical safety switches to make homes toddler-proof. His partner is in real estate and has great marketing skills.

Shayne, who is a fashion designer with a large Instagram following, has partnered with a friend with photography skills to sell his services as a market influencer.

Referring to the strategic advantages listed in the preceding section, have a think about which of these advantages could be relevant to the example businesses. You can see how I’ve rated the strategic advantage potential for each of the four businesses in Table 2-1.

Have a look at Table 2-1and see if you agree with my assessment of potential advantages. For example, can you think of ways that someone with a lawn mowing business could get an edge over competition with added value services, location or lower costs?

TABLE 2-1Rating Businesses According to Potential Strategic Advantage