Phil Friedman

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A Competitive Edge Is Never Forever

A Competitive Edge Is Never Forever

CALL IT RESTING ON YOUR LAURELS OR SITTING ON YOUR BUTT, FAILURE TO KEEP ADAPTING EVENTUALLY ENDS IN BEING LEFT BEHIND ...


Competitive edge: the fact that a company has an advantage over its competitors ...

Cambridge English Dictionary

Having a "competitive edge" ― also known as a competitive advantage involves one's product, whether goods or services, being imbued with a singular feature that distinguishes it in a positive way from the competition.

A competitive edge can be as simple as lower pricing for comparable quality. Or it can be an entirely non-price-comparable feature or benefit. But whatever it is, it always sets a business's products, whether goods or services, apart from others in the marketplace.

It is, therefore, no surprise that smart business operators are always seeking to secure a competitive edge, for it can often mean the difference between failure and success.


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A competitive edge, however, is never forever ...

It's important always to keep in mind that a competitive edge is never forever. If and when your small business finds and capitalizes on a particular competitive advantage, that advantage will sooner or later be matched or overtaken by one or more competitors.

A contemporary case in point is SEO (search engine optimization), in which a firm revises online website and content to produce maximum visibility in a web search engine's unpaid results.

Usually, the objective is to appear earlier (or as "higher ranked") on the search results page(s). For the earlier and more frequently a firm appears in a search engine's results for a given search expression, the more visits that firm receives by search engine users who can potentially be converted into customers. ( https://en.wikipedia.org/wiki/Search_engine_optimization )

Here's the thing, though. If SEO works for you and provides you with a competitive edge versus your competitors, it does so only for a short while since you can bet they are working hard on their own SEO.

Not only that. The search engines are continually revising and "strengthening" the algorithms they use to rank entries, so what works today to help yours to find a place near the top of the first page, may not work next month, next week, or even tomorrow.

Which means that not only does it cost in time and money to achieve a competitive edge in the search engine listings, it costs even more in time and money to maintain that advantage once you've achieved it.

It also means that, as a small-business operator, you have to evaluate carefully how durable the competitive edge you might create will be. That is to say, how long it will last before you have to find (and invest in establishing) another.


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In other words, it's the ratio of benefit to cost that really matters ...

Moreover, the benefit to cost ratio matters not only in respect of initially gaining a competitive edge but also in regard to maintaining that edge going forward. Let me illustrate.

Some years ago, I was the CEO of a major world-class luxury yacht shipyard. We built 100 to 180 foot welded aluminum yachts that sold in the tens of millions of dollars. One of our major labor costs was in "fairing" the hulls prior to painting, a process that involved applying a thick polymer putty by trowel then sanding the cured (hardened) putty with long abrasive-covered boards to remove any local humps and hollows and produce a smoothly sweeping curvature in the hull surface in all directions. Hundreds, if not thousands of labor hours were involved, depending on the size of the yacht.


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One day at a boat show, I was approached by a long-time friend and colleague in the industry, who had developed patented technology for the robotic fairing of yacht hulls. The technology had the potential to save a shipyard hundreds of hours and tens of thousands of dollars. And he was looking for funding to get a full-size demo operation up and running.

His pitch was that using his technology would give my firm a definite competitive edge in the marketplace because we could take as much as half a million dollars out of the cost of building a large yacht. Which, in turn, meant we could deliver the same quality of fit and finish as we always did, but at a lower price.

He was taken aback when I asked if our capital contribution would buy us a five-year agreement for exclusive use of the robotic technology...

He asked why I would want that, after all, the technology would be reducing my building costs on a large yacht by nearly a half million dollars.

I explained to him that I assumed he wanted to get one shipyard in the world using his technology and that he was banking on the fact the competitive pricing advantage so gained by that one shipyard would force the other yards to follow suit.

I pointed out to him that the cost savings that might result from my firm employing his robotic technology would only represent a competitive edge if our competition could not follow suit. And only for as long as they could not follow suit. For once they too employed the technology, we would all be back where we started, competitively level with one another at least in terms of pricing.

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It's critical never to forget that a competitive edge is purely relative...

Competition is just that. Each participant reaching for an advantage, each seeking to recover a lost first position.

Consequently, when you consider where to invest its time and capital in developing a competitive edge, the smart move is to focus on a durable differentiator so that you can keep your edge as long as possible.  Phil Friedman


Author's Notes:  If you found  this article worthwhile, you might want to takes a look at the following posts:

"Common Myths About Starting Your Own Small-Business" 

"Avoid Marketing Myths That Bite"

"Avoid the Pitfall of Excessive Positivity"

You might also be interested in my new eBook, Small-Business Primer: Real -World  Tips for Starting and Running Your Own Small Business.

For information on securing a copy, email phil@portroyalgroup.com and put "small-business book" on the subject line.

Are you starting up or currently operating a small business and facing a problem or issue on which you could use some help? Consider our offer below:

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About me, Phil Friedman With 30 some years background in small business and the marine industry, I've worn numerous hats — as a yacht designer, boat builder, marine operations and business manager, marine industry consultant, marine marketing and communications specialist, yachting magazine writer and editor, yacht surveyor, and marine industry educator. I am also trained and experienced in interest-based negotiation and mediation. In a previous life, I taught logic and philosophy at university.

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#SMALLBUSINESS #BUSINESSMANAGEMENT #BOOSTPROFIT #BETTERBUSINESS  #BUSINESSCONSULTING  #ENTREPRENEURSHIP  #STARTYOUROWNBUSINESS #ENTREPRENEUR #BUSINESSSTARTUP #RUNNINGYOUROWNBUSINESS #CASHFLOW #PROFIT #P&L #CASHMANAGEMENT #PROFITVERSUSCASHFLOW#COMPETITIVEEDGE #COMPETITIVEADVANTAGE #STAYAHEADOFCOMPETITION


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Comments
Claire L Cardwell

Claire L Cardwell

2 years ago #7

Great advice here Phil Friedman!

Phil Friedman

Phil Friedman

3 years ago #6

#6
I agree, Pascal, although I prefer to couch it in terms of what is "durable" and what is not. A pricing differentiator (for a given level of value) is probably the least durable form of a competitive edge. And often the most durable is a value-adding characteristic that is exclusive and non-price-comparable. Thanks, as always, for your insight. Cheers!

Pascal Derrien

Pascal Derrien

3 years ago #5

True competitive advantage is always a unique value prop or a break thru product too many companies brag about disruption when in reality they are just tagging along a trend and have not much more than a vague concept. It's valid for small and large companies sometimes large companies bet on the wrong products I remember DAT and other products when I was in Sony which led to completely missed the boat :-) on digital and they have been playing catch up ever since... :-)

don kerr

don kerr

3 years ago #4

#4
grand idea

Phil Friedman

Phil Friedman

3 years ago #3

#3
As long, Charlene, it's a good Irish ale and not a Molson's. Next time I'm in Taranna, I'll call you and your Bullet Head ... er Bullet Proof cohort, and we can get together in St. Catherines. Maybe add the two other Beezers. And with Renee and Graham and maybe Paul (if we can get him to run up) to round out the crew, it should be a rip-roaring time. :-) Thanks for reading and commenting. Cheers!

Charlene Norman

Charlene Norman

3 years ago #2

Hot damn. We need to have a beer one day and compare war stories. This is so so true. Thanks Phil. A good reminder for all

Phil Friedman

Phil Friedman

3 years ago #1

#1
in the instance, Vincent, no. He found some partial support from one of the major paint and coatings manufacturers. I helped with letters of support for the concept and my recommendation that they needed to offer a lease-lend program on the equipment until it was being used sufficiently to put the majority of shipyards into a need to catch up position. However, resistance in the industry remained high because no shipyard cares about reducing costs unless and until higher costs put it at a competitive DISadvantage. Cheers!