Michael D. Moberly March 22, 2010
This post is about competitive advantages. First, it’s important to recognize that a company’s competitive advantages (business differentiators) are, in fact, intangible assets. Second, in today’s globally predatorial, aggressive, and winner-take-all business (transaction) environment, a company’s competitive advantages must be durable. That is, their status, stability, fragility, defensibility, materiality, sustainability, and value should be routinely monitored and assessed relative to (a.) vulnerability to duplication/replication, and for (b.) protection and improvement.
I have found the following definitions beneficial insofar as helping management teams and boards frame- conceive their company’s competitive advantages…
1. they’re unique blends and/or collections of attributes, processes, assets, relationships, history, and even market conditions that a company exploits to differentiate itself, and thus create value. (Michael Porter).
2. they lie in the unique proprietary knowledge employee’s possess, and the special value that evolves from understanding of how to apply that (unique) knowledge that provides the real edge. (McKinsey)
Of course, in both definitions, the word ‘unique’ is, and should be the common framing point. But, with increasing frequency, sustaining competitive advantages is challenging for company management teams and boards, in part due to the realities that significant percentages of (a.) all new products, and (b.) business service improvements and efficiencies can be, and usually are, duplicated, replicated, or diffused to global competitors in briefer periods of time from the point they became operational. In other words, competitive advantages, like most other intangibles are consistently vulnerable and at risk!
As effectively conveyed by Ed Adkins (mystrategicplan.com) developing competitive advantages isn’t always easy or straightforward, because, in many instances, competitive advantages are developed (over a period of time) by recognizing and then nurturing a company’s strengths. In some instances, this longer internal process, can render them more difficult to replicate, or, at least not replicated as quickly.
Regardless, when 65+% of most company’s value, sources of revenue, foundations for growth and sustainability directly evolve from intangible assets, e.g. competitive advantages, ensuring they’re routine action items on management team and board agendas for oversight, will be beneficial!