A Competitive Advantage is Never Forever

A Competitive Advantage is Never Forever

Whether you see it as resting on your laurels or sitting on your butt, failing to constantly adapt leads to being left (on your) behind.

by Phil Friedman, Marine Industry Consultant

Always seek a competitive advantage

Having a “competitive advantage” involves imbuing your product with a singular feature or set of features that distinguish it in a positive way from that of your competition.

Your competitive advantage can be as simple as lower pricing for comparable quality or it can be an entirely non-price-comparable value or benefit. But whatever it is, a competitive advantage always sets your product — whether goods or services — apart from others in the marketplace.

It’s, therefore, no surprise that smart business operators always seek to secure a competitive advantage, for it often means the difference between failure and success.

A competitive advantage, however, is never forever

It’s important to keep in mind that a competitive advantage, however hard-won, is never forever.

You can be certain that, if and when your business finds and capitalizes on a given competitive advantage, that advantage will sooner or later be matched or overtaken by one or more of your competitors.

A prime example of that fact is found in Search Engine Optimization (SEO).  SEO involves revising online websites and content to produce maximum visibility in a web search engine’s unpurchased results.

Usually, the objective is to appear earlier and with a greater number of entries in the search results. For the earlier and more frequently a firm appears in such search results for a given search expression, the more visits that firm generally receives from search engine users who are potential customers.

https://en.wikipedia.org/wiki/Search_engine_optimization

But here’s the thing. If successful SEO works for you and provides you with a competitive advantage over your competitors, it does so only for a short while — since you can bet your competitors are working hard on their own SEO.

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

And that means not only does it cost in time and money to achieve a competitive advantage in the internet search results, it costs additionally and ongoing to maintain that advantage once you’ve achieved it.

Evaluate the potential durability of a given competitive advantage

It also means that, as a small-business operator, you have to evaluate carefully how durable any competitive advantage you might create will be — that is to say, how long it will last before you have to find and invest in establishing a replacement.

In other words, it’s the ratio of benefit-to-cost that really matters, not only in respect of initially gaining that advantage initially but also in regard to maintaining it going forward. Let me explain what I mean.

Some years ago, I did a stint as the CEO of a major world-class luxury yacht shipyard, where we designed and 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 troweling on a polymer putty then sanding the cured (hardened) putty with long abrasive-covered boards to remove any local humps and hollows and produce a smoothly sweeping curvature of the hull surface in all directions. Hundreds, if not thousands of labor hours were involved, depending on the size of the yacht.

One time at a boat show, I was approached by a long-time friend and colleague in the industry. He had developed and patented technology for the robotic fairing of yacht hulls. The technology had the potential to save a shipyard many of those hundreds and even thousands of hours, not to mention tens of thousands of dollars. And he was looking for help in funding a full-size demonstration project.

His pitch was that using his technology would give my firm a definite competitive advantage 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, would mean we could deliver the same quality of fit and finish as we always had, but at a significantly lower, more competitive price.

He was taken aback when I asked if a capital contribution to the development would buy us a five-year agreement for exclusive use of the robotic technology after it was proven. He asked why I would want that since, after all, the technology would be reducing my building costs on a large yacht by nearly a half million dollars.

A competitive advantage is always relative

As much as I personally wanted to help, I had to explain to him that I assumed he wanted to get one shipyard in the world to implement his technology and, further, that he was banking on the fact a competitive pricing advantage so gained by one shipyard would force other yards to follow suit and purchase or license the patented robotic fairing technology.

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

Competition is just that. Each player reaching for an advantage, each seeking to establish or recover a lost first position. Consequently, when you consider where to invest time and capital in developing a competitive advantage, the smart move is to focus on developing a durable differentiator so that you can keep your advantage for as long as possible.

― Phil Friedman

About Phil Friedman Phil is a Marine Industry Consultant, Project Developer/Manager, and Marketing and Small-Business Startup expert with the Port Royal Group in the greater Fort Lauderdale, FL area.

With 30 some years in the marine industry, he has worked variously as a yacht designer, boat builder, marine business manager, yacht surveyor, consultant, yachting writer and editor, and industry educator. He is also trained and experienced in interest-based negotiating and mediation. His current work includes the start-up management for two new yacht lines being built in China.

Phil is always up for talking about new projects and can be contacted at 1.954.224.2145 or info@portroyalgroup.com.