Michael D. Moberly May 21, 2012
First, it’s important to recognize that a company’s competitive advantages or business differentiators are embedded in its intangible assets, e.g., brand, image, goodwill, reputation, relationship capital, etc.
Second, in today’s globally predatorial and aggressive business (transaction) environment in which consumers have multiple, sometimes infinite and instantaneous choices that are literally a ‘mouse click’ away, competitive advantages must be durable, resilient, and always monitored.
To achieve these necessary (product – service) characteristics, the assets’ stability, fragility, defensibility, and universality must, not should, be regularly assessed with particular attention to:
- vulnerability to replication, and
- reputation risk.
Should either of the above materialize it can rapidly undermine and/or erode an assets’ value, competitive advantage and reputation which can persist for extended periods of time term, or worse, become irreversible, if not lethal to a company.
So, the following represent two useful starting points or perspectives which I have found to resonate with management teams, c-suites, and boards insofar as characterizing competitive advantages, i.e., they can be…
- embedded in unique and sometimes proprietary knowhow and/or blends of particular attributes, processes, assets, relationships, history, and even market conditions that a company exploits to differentiate itself, and thus create value. (adapted by Michael D. Moberly from the work of Michael Porter).
- the special contributory value that flows from understanding how, when, and where to apply a company’s unique knowhow to provide a competitive edge. (adapted by Michael D. Moberly from the work of McKinsey)
Obviously, the word unique is, and should, in my view, serve as a framing point, particularly for management teams that are operationally unfamiliar with intangibles, or find them challenging to articulate in a ‘laundry list’ fashion, i.e., state precisely what differentiates their company’s products – services in their market space.
Successful and profitable companies already know this, but, sustaining product – service competitive advantages, in what I refer to as an ‘instantaneous global market space’, is an increasingly challenging proposition. Unfortunately, such challenges are due, in part, to the reality that management teams, c-suites, and boards overlook, or through ‘permissive neglect’, fail, at least in a timely fashion, to recognize that a significant percentage of new products, services, improvements, efficiencies, and the contributory (proprietary) knowhow is consistently vulnerable, unless effective safeguards are in place.
However, the reality is, intangible and other assets are consistently at risk by ever expanding and diverse groups of global competitors and/or state sponsored entities!
Developing competitive advantages (intangible assets) is one thing, but nurturing, monitoring, and managing the attendant risks, isn’t nearly as straightforward and it’s an aspect notably absent from conventional ‘mba’ curricula. In part, that’s attributable to competitive advantages are often ‘built into’ a product or service before launch and marketed accordingly. By this time, asset recognition, assessment, nurturing, and risk management must be well in place.
This should be an extended (internal) process that indeed requires involvement (i.e., stewardship, oversight, collaboration) from management teams, c-suites, and boards. The not-to-be-overlooked objectives are to create enterprise-wide circumstances in which it is more, not less difficult for adversaries to acquire and replicate valuable and competitive advantage driving assets, and certainly not as quickly.
Collectively, the persistent risks attendant to a company’s competitive advantage (intangible) assets represents another adverse business (risk) reality that makes it all-the-more-important for management teams, c-suites, and boards to consistently devote the time necessary to ‘drill down’ into the array of intangible assets their company produces to assess their contributory value and potential for effective (profitable) exploitation as a competitive advantage.
Regardless, when it became an economic fact – business reality more than a decade ago, that 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth and sustainability evolve directly from intangible assets, among them being competitive advantages, ensuring they are routine action items on management team, c-suite, and board agendas for oversight, stewardship, and management is an absolutely necessary requisite!
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