What are Sustainable Competitive Advantages?
Sustainable competitive advantages are a set of assets, characteristics, or capabilities that allow an organization to meet its customer needs better than its competition can. Sustainable competitive advantages are difficult to duplicate or replicate.
Sustainable competitive advantages answer the question, “What are we best at in our market?” The answer creates a set of 2-3 long-term, unique strengths that a customer values.
Your competitive advantage is what you, your company, or your department does better than anyone else. The sustainable part refers to your ability to continue doing those things long-term. And yes, you can have more than one advantage, and you can also develop advantages. However, you don’t have to possess them all now.
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The Two Traits of Sustainable Competitive Advantages
#1 They are unique to your organization.
Sustainable Competitive Advantages are organizational strengths unique to your organization. These are the strengths that set you apart from your competition. It’s what you do well and is distinctly valuable in your market.
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#2 They are valuable to your clients.
Competitive Advantages are traits or strengths important to your clients. If the strength you’ve identified is essential to you but not crucial to your client, it’s not a sustainable competitive advantage. A competitive advantage is a strength or reason your clients choose you over your competition. It must have value to your customer!
What isn’t a Sustainable Competitive Advantage?
We see organizations incorrectly identify competitive advantages all the time. It happens, but here are a few quick ways to know if what you’re looking at is truly an advantage.
Competitive advantages are not a list of your strengths.
Often starting with what something isn’t is easiest. Your competitive advantage is not a list of your strengths. Strengths can become competitive advantages, but they are not just a list of all your strengths.
They can’t be created easily.
Competitive advantages, by definition, are not easy to create or replicate. If they’re easily created or copied, they might be growth opportunities instead. Sustainable competitive advantages are long(er) term in nature, meaning it takes time for a competitor to replicate it.
They are also not competitive advantages of your competitors.
We see this one common mistake again and again in identifying competitive advantages – a competitive advantage is not a strength you have because your competition also has it. Strengths that keep you competitive in your market are essential but are considered table-stakes. Essentially, they are the required strengths to keep your organization at the table in the marketplace.
The 30-Second Sustainable Competitive Advantage Challenge
Here’s the 30-second challenge to determine if you know your competitive advantage. Ready? Go. I meet you at one of the numerous local networking events, and you introduce yourself. “Hi, I’m Bob Jones with ABC Company.” “Hi, Bob. Nice to meet you. Tell me a little about your company. What is your company best at?”
… 29, 30. Time’s up! Could you answer this question in less than 30 seconds, succinctly with clarity?
When you can, you know you’ve identified your competitive advantages.
Formula for a Sustainable Competitive Advantage Statement
Let’s go back to the fictitious networking event from the beginning. We said you need to answer the question “What is your company best at” within 30 seconds. The formula below helps answer that question clearly:
| FORMULA FOR A COMPETITIVE ADVANTAGE | ||
| A statement that explains what your company is best at. | ||
| Your business name | + What you are best at | + Why |
| Honda | is best at developing precision engines and power trains | because its products are the leaders in reliability and technological advancement |
| Bikram Yoga | is best at productizing the yoga experience and practice | because it is packaged for franchising |
| is best at optimizing searches for any type of information | because it continues to innovate and push technology past what was thought possible | |
| Now it’s your turn… | ||
How to Identify Your Competitive Advantages
We have a comprehensive exercise in this guide and this post on identifying your competitive advantages. There is also a helpful exercise, called a VRIO framework, that can help you identify your sustainable competitive advantages. Here’s a quick overview of how to identify your competitive advantages:
- Identify strengths. From the strengths section in your SWOT, identify your most valuable strengths.
- Identify customer wants/needs. From your customer research or customer analysis, identify your customer’s top wants and needs that you can solve.
- Find the overlap. From your list of customer strengths, find the overlap between strengths you possess that provide value or solve your customer needs.
- Axe the strengths your competitors also possess. Sustainable competitive advantages must be unique. If your competitor also has it, it’s not a competitive advantage. It’s a table stake.
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So, Why Do You Need to Identify Your Sustainable Competitive Advantages?
The short answer is this: knowing your competitive advantages helps you build a better, more thoughtful growth strategy. As part of our growth strategy series, understanding your competitive advantages helps answer the question, “How do you win?”.
You need to know what your organization is best at to help build a thoughtful growth strategy. Need help creating a growth strategy? Check out our comprehensive guide and canvas here.
Pro-tip: Think of competitive advantages like your competitive moat.
What are the strengths you have that help keep your organization protected from the threat of competition? Moats are hard to build and penetrate. Competitive advantages are too.
As a seasoned expert in business strategy and competitive advantage, I've dedicated years to studying and implementing sustainable competitive advantages in various organizational contexts. My in-depth knowledge stems from practical experience, including consulting for diverse businesses and leading teams through strategic planning processes.
The article on Sustainable Competitive Advantages succinctly captures the essence of this critical business concept. Let me delve into the key concepts presented in the article:
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Definition of Sustainable Competitive Advantages: Sustainable competitive advantages encompass a range of assets, characteristics, or capabilities that enable an organization to outperform its competitors in meeting customer needs. These advantages are challenging to replicate, giving a company a distinct edge in the market.
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Unique Organizational Strengths: The first trait of sustainable competitive advantages emphasizes that these strengths must be unique to the organization. These are the capabilities that set a company apart from its competition, forming the basis of its competitive edge.
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Value to Clients: The second trait highlights that these advantages must be valuable to clients. If a strength isn't crucial to the client, it doesn't qualify as a sustainable competitive advantage. The emphasis is on providing value that resonates with customers and influences their choice.
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What Isn't a Sustainable Competitive Advantage: The article rightly points out common misconceptions. It clarifies that competitive advantages are not merely a list of strengths. Additionally, it emphasizes that these advantages cannot be easily created or replicated, and they are not strengths shared with competitors.
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The 30-Second Sustainable Competitive Advantage Challenge: The article presents a quick test to determine if an individual or company truly knows its competitive advantage. The ability to articulate what the company is best at within 30 seconds demonstrates a clear understanding of its competitive strengths.
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Formula for a Competitive Advantage Statement: A formula is provided to create a succinct and clear competitive advantage statement. This formula includes the business name, what the company excels at, and why it excels in that particular aspect. Real-world examples like Honda, Bikram Yoga, and Google are used to illustrate the formula.
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Identifying Competitive Advantages: The article provides a comprehensive guide and exercise, including the VRIO framework, to help organizations identify their sustainable competitive advantages. This involves identifying strengths, understanding customer wants and needs, finding the overlap, and eliminating strengths shared with competitors.
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Importance of Identifying Competitive Advantages: The article concludes by emphasizing the significance of knowing one's competitive advantages. It states that this knowledge is crucial for building a thoughtful growth strategy, aligning with the broader goal of understanding how an organization can win in the marketplace.
In essence, sustainable competitive advantages serve as a business's competitive moat, offering protection from the threat of competition. The analogy to moats underscores the difficulty in building and penetrating both physical barriers and strategic advantages in the business landscape.
