Business leaders focus a lot on the importance of competition and how to create a competitive advantage. However, the late creativity guru Edward de Bono once stated, “Companies that solely focus on competition will die. Those that focus on value creation will thrive.” That sentiment was echoed by the late Harvard Business School professor Clayton Christensen. One of Christensen’s last books was entitled Competing Against Luck: The Story of Innovation and Customer Choice, coauthored by Karen Dillon, Taddy Hall, and David S. Duncan. In the book, they discuss the Theory of Jobs to Be Done. According to the book’s introduction, that theory helps companies understand their “customers’ struggle for progress and then [creates] the right solution and attendant set of experiences to ensure [they] solve [their] customers’ jobs well, every time.” Stated another way, the Theory of Jobs to Be Done suggests that creating value for customers is the best way to compete.

Putting Business Competition in Perspective

Analysts from Kompyte note, “You can’t get too wrapped up in the competition. … Through effective competitive intelligence comes self-awareness and self-improvement. The better informed and educated you are on where you and your competition stands in relation to each other and the market, the better decisions you will make and the more prepared you will be for new opportunities.”[1] Understanding the competition is certainly important. However, if you focus only on the competition and don’t give equal focus to customers, you are hobbling your ability to compete.

Like de Bono and Christensen, the staff at tutor2u asserts that a business should always view competitive advantage in terms of value-added. They write, “Competitiveness can be defined as: The ability of a business to deliver better value to customers than competitors.”[2] They add, “Competitive advantage means: The ability of a business to add more value for its customers than its rivals and attain a position of relative advantage. A situation where a business has an advantage over its competitors by being able to offer better value, quality and/or service. The key word in [those statements] is ‘value’. Value is what a customer is prepared to [part with their] money for. A business that offers better value than competitors will enjoy an advantage. … A customer’s perception of value is very personal. It is usually based on several intangible factors as well as tangible factors. The hard bit for a ‘competitive’ business is to work out what [the] customer values — and then deliver that [value]!”

Competitive advantage doesn’t just create value for customers — it creates corporate value as well. Kyle Peterdy, Vice President for Commercial Banking and Credit at the Corporate Finance Institute, explains, “A competitive advantage is something that cannot be easily replicated and is exclusive to a company or business. This value is created internally and is what sets the business apart from its competition. … It allows a company to achieve superior margins and generate value for the company and its shareholders.”[3]

Improving Your Competitive Position

Christensen and his colleagues wrote, “If a company doesn’t understand why [a customer might] choose to ‘hire’ its product in certain circumstances — and why [they] might choose something else in others — its data about [customers] is unlikely to it create any new innovations. … Few innovators frame their primary challenge around the discovery of a cause. Instead, they focus on how they can make their products better, more profitable, or differentiated from the competition.” The type of deep understanding that Christensen and his colleagues wrote about is not easy to achieve. That’s one reason companies are keenly interested in leveraging causal artificial intelligence. Christensen noted, “Correlation isn’t the same as causality. But although most organizations know that, I don’t think they act as if there is difference.” Chasing correlation rather than discovering root causes of behavior can lead organizations down dead-end streets. Causal AI systems, like the Enterra Revenue Growth Intelligence System™ (ERGIS™), can help organizations understand how to generate value in today’s competitive landscape.

The first thing any organization needs to do when looking for a competitive advantage is to have a deep understanding of itself. A variety of ancient Greek philosophers have been given credit for offering the advice “know thyself”; regardless of who said it first, the advice remains sound. Sean Ross, CEO at 1031X, explains, “Most companies are either founded on a competitive advantage or can apply certain criteria toward finding their competitive advantage. Much of this can be performed through deduction and a process of elimination. After all, your competitive advantage is, by definition, something your competitors do not have. To find a lasting competitive advantage, look for something that your competitors cannot easily replicate or imitate.”[4]

The tutor2u staff suggests you ask yourself a series of questions to help you determine where the value-added is that your company provides. Questions include: Do we provide a price advantage for our customers? Do we offer unique features or benefits in our products and/or services? Do our products and/or services provide customers with enjoyment or satisfaction they cannot otherwise obtain? Is the primary benefit of our products and/or services that they save time for our clients? You might be surprised what the answers to those questions reveal. The staff at GB Advisors notes, “Customers have short-term memory and an infinite number of options at their fingertips.[5] They ask, “So, how can you stand out from the crowd and achieve customer loyalty?” You can’t stand out from the crowd if you don’t know for what customers are truly looking. Advanced analytics, like those used in the Enterra Shopper Marketing and Consumer Insights Intelligence System™, can help organizations understand their customers better.

Concluding Thoughts

The staff at Indeed notes, “As a business owner, it is important to maintain and grow your business to continuously fulfill the needs of your customer base. You can do this by maintaining a competitive edge against other businesses in your industry.”[6] Once you understand the needs of your customer base, you need to look internally to figure out how operations can be improved to provide the best value proposition for customers. According to the Indeed staff, there are two primary areas of focus. They are:

• Price competitiveness: “Price competitiveness refers to the situation where a business can maintain the quality of their goods or services they offer while still pricing them lower than their competitors.”

• Structural competitiveness: “Structural competitiveness refers to the situation where a business can maintain better sales or customer loyalty over competitors regardless of the prices they offer. This can be because they have a stronger brand identity, better quality products and services or additional products or services that their competitors don’t offer.”

Keeping business competitiveness in the right perspective is essential to maintaining a competitive advantage. The primary focus should be on adding value for customers while simultaneously having a good understanding of what the competition is doing.

Footnotes
[1] Staff, “10 Inspiring Quotes On Competition In Business,” Kompyte Blog, 18 November 2019.
[2] Staff, “Competitiveness,” tutor2u, 22 March 2021.
[3] Kyle Peterdy, “What is Competitive Advantage?” Corporate Finance Institute, 26 November 2022.
[4] Sean Ross, “How Do I Determine My Company’s Competitive Advantage?” Investopedia, 18 December 2022.
[5] Staff, “Business Competitiveness: How to make the company more competitive?” GB Advisors Blog, 24 April 2019.
[6] Staff, “What Is the Definition of Competitiveness in Business?” Indeed.