Competitive Advantage --- You May Already Have It

© Copyright by William A. Cohen, 2004

 

The concept of competitive advantage originated with marketing theorists, but it is really applicable to all types of strategy.  Basically it is defined by what you have that your competitor does not that is important in the particular situation or environment in which you are competing.

 

The Theory of Competitive Advantage

Usually marketing theorists talk about a “sustainable” competitive advantage. However, it’s clear you don’t need to “sustain” forever --- only until it is unimportant to reaching your goals in the situation in which you are competing. For example, if you have a competitive advantage because you have a software programming genius on your staff who suddenly quits and becomes a stockbroker, this may not be so important if he already wrote the program which is going to put you in the preeminent position versus your competition for the foreseeable future. His presence need not be sustained forever to maintain an advantage over competitors. Similarly, a candidate running for president may have a competitive advantage because he (or she) has a war chest of campaign funds superior to other candidates. During the campaign, he would like to sustain that competitive advantage, but once the election is over, the candidate, win or lose, moves on to other things.  It is no longer necessary to sustain that particular competitive advantage for the election.

However, the concept itself of competitive advantage is valid because it affects what you can ultimately offer your customer in performance, price, service, variety or some other attribute. In the case of marketing, it is clear that without some reason, no customer is going to prefer you over the competition. It is your competitive advantage that is the rationale for that preference and results in creating or maintaining a customer.

You May Already Have a Competitive Advantage

Many times you may already possess competitive advantages in many, if not most of your undertakings, although you may not realize it.  Over the years, it’s become clear to me that in every setback or problem the seed of an equal or greater advantage can be found --- you just have to look for it.

I’ve heard this concept attributed to multibillionaire W. Clements Stone who passed away not long ago at the age of 100. As a young man Stone had founded an insurance agency that didn’t issue policies of its own – it sold other companies’ insurance. He personally trained his salesmen and they did well --- maybe even too well. They began to outsell the salesmen from an insurance company whose policies represented most of Stone’s agency’s business. The salesmen of this insurance company complained to their management about the competition Stone’s salesmen who were also selling this company’s policies. Eventually these complaints reached the company president of this insurance company.

Stone was on vacation when he received a telephone call from an assistant in his agency. The president of the insurance company had left a message that Stone’s salesmen would be prohibited from selling the firm’s insurance at the end of the week. Since this represented the majority of Stone’s sales, the effect would be to put him out of business.  As you might imagine, this brought considerable apprehension to Stone’s salesmen. They couldn’t imagine an alternative other than Stone’s bankruptcy. However, Stone realized that somewhere in the disaster was the seed of an equal or greater benefit --- a competitive advantage he previously had never realized --- all he had to do was find it.

First he told his salesmen not to worry. The, as soon as Stone recovered from the initial shock, he called the insurance company president and asked if he would see him the following day. The president of this insurance company agreed. Stone caught a plane and mentally prepared, went to see this man. At the meeting, Stone convinced the president to give him a little more time. He won a reprieve until the end of the month.  By then he knew what he was going to do and started taking action to do it. Stone decided that the only thing to do was to start his own insurance company and sell his own policies, which he did.

It seems strange to consider potential loss of a significant part of a company’s business a competitive advantage, but in this case, it was. Until then, Stone had never thought about starting his own insurance company. However, not being able to selling this other company’s insurance forced Stone to think differently and to start his own insurance company. This company eventually took him from being merely well off to becoming a billionaire.

The recent democratic debates provide an example of another type of competitive advantage that was already present in the situation. Howard Dean, the former front-runner attacked Senator Kerry, who now led the democratic pack of candidates.

“None of Kerry’s health care bills passed,” said Dean. “The trouble with Kerry is that he is a Washington insider.” 

Rejoined Kerry, “Governor Dean’s comments show that he doesn’t understand Washington at all. It takes a Washington insider to be the kind of president that gets things done, an outsider who doesn’t understand the system can’t do very much.”

Note that both candidates had competitive advantages in this debate and in the competitive situation in general, but that these advantages are complete opposites: Dean that he is a Washington outsider, with no “baggage” from working in the federal government; Kerry that he is a Washington insider and therefore knows how the system operates and how to make it work.

This is true in many situations. A disadvantage may be an advantage if looked at another way.  Do you remember the presidential debates of twenty years ago when Walter Mondale, the democratic candidate challenged Republican President Ronald Reagan who was running for his second term? The democrats had attacked Reagan as being a nice person, but getting too old for the job. 

During the question and answer part of the second debate, someone asked Reagan if he thought that a candidate’s age should be a factor in the election. In his “aw shucks” manner, Reagan answered: “Absolutely not. I won’t take advantage of my opponent’s youth and relative inexperience.” Even Mondales laughed. Mondale may have had youth as a competitive advantage, but Reagan had age!

Peter Drucker says You Must Become an Expert in Two Fields

Peter Drucker, the towering management genius of our time, claims that every manager should become experts in two widely disparate fields.  In his own case, Drucker was simultaneously a professor of management and a professor of Japanese art.

Thinking about this I could understand some real advantages for what Drucker recommended, including gaining temporary relief from the pressures of one discipline by immersing in the challenges of another. However, I also recognized that there was a real competitive advantage in applying concepts, ideas, methods, and techniques well-known and understood in one field to an entirely different field of human endeavor where none of these are known.  This is far from theoretical. Jay Abraham, the consultant who claims to be the highest paid consultant in the world, credits much of his success with his ability to take concepts working well in one field, and adapting them to another where they are completely unknown.

This is another competitive advantage you might already enjoy without realizing it. Arthur Conan Doyle was the creator and author of the still popular Sherlock Holmes detective series, and this series is now well over 100 years old!

Conan Doyle didn’t start out as a writer. In fact, he was a practicing physician and gained most of his income as a doctor well into his literary career. The Sherlock Holmes character he created was based largely on one of his instructors in medical school who taught his students to deduce much in diagnosis of a patient’s illness from a patient’s appearance even before the patient uttered a word of complaint. Obviously Holmes’ sidekick, Dr. Watson came out of Conan Doyle’s medical background as well. Although generally credited with starting the genre of detective writing, Conan Doyle wrote much besides Sherlock Holmes. He is considered one of the most outstanding literary figures of the 19^th and early 20^th centuries and he was eventually knighted. Clearly Conan Doyle possessed a significant inherent competitive advantage over other writers for his stories due to his extensive medical background.

In studying the careers of other well-known literary figures, I have noted a similar competitive advantage by those who previously (or even simultaneously) practiced a different calling, and this is not just true of writers. I can think of several U.S. generals who became famous as warriors after having enjoyed the practice of other careers including medicine, law, and academia. If you are working in a different career from the one you started, you probably already enjoy a competitive advantage over your competitors that you may not have thought about or utilized.

What this all means is this: Competitive advantage is an important concept necessary for success in competitive situations --- but you may already have it. All you need do is think!