**Original Question “How do we compete, what’sthe basis of our Competitive Advantage? WhatResources or Capabilities do we Leverage andHow?”*The Correct Question - “I guess you are stuckwith the Classical Legacy Theory ofCompetitive Advantage. Allow me to rectifythat theory and build upon it to answer yourquestion. Shall we?”
** When a firm sustains profits that exceed the average for its industry, the firm is said topossess a competitive advantage over its rivals. The goal of much of business strategyis to achieve a sustainable competitive advantage.* Michael Porter identified two basic types of competitive advantage* cost advantage* differentiation advantage* A competitive advantage exists when the firm is able to deliver the same benefits ascompetitors but at a lower cost (cost advantage), or deliver benefits that exceed thoseof competing products (differentiation advantage). Thus, a competitive advantageenables the firm to create superior value for its customers and superior profits foritself.* Cost and differentiation advantages are known as positional advantages since theydescribe the firms position in the industry as a leader in either cost or differentiation.* A resource-based view emphasizes that a firm utilizes its resources and capabilities tocreate a competitive advantage that ultimately results in superior value creation.Ref: http://www.quickmba.com/strategy/competitive-advantage/
** According to the resource-based view, in order to develop a competitive advantage thefirm must have resources and capabilities that are superior to those of its competitors.Without this superiority, the competitors simply could replicate what the firm wasdoing and any advantage quickly would disappear.* Resources are the firm-specific assets useful for creating a cost or differentiationadvantage and that few competitors can acquire easily. The following are someexamples of such resources* Patents and trademarks* Proprietary know-how* Installed customer base* Reputation of the firm* Brand equity* Capabilities refer to the firms ability to utilize its resources effectively. An example ofa capability is the ability to bring a product to market faster than competitors. Suchcapabilities are embedded in the routines of the organization and are not easilydocumented as procedures and thus are difficult for competitors to replicate.* The firms resources and capabilities together form its distinctive competencies. Thesecompetencies enable innovation, efficiency, quality, and customer responsiveness, allof which can be leveraged to create a cost advantage or a differentiation advantage.
**Competitive advantage is created by usingresources and capabilities to achieve either a lowercost structure or a differentiated product. A firmpositions itself in its industry through its choice oflow cost or differentiation. This decision is a centralcomponent of the firms competitive strategy.*Another important decision is how broad or narrowa market segment to target. Porter formed a matrixusing cost advantage, differentiation advantage,and a broad or narrow focus to identify a set ofgeneric strategies that the firm can pursue tocreate and sustain a competitive advantage.
**The firm creates value by performing a series ofactivities that Porter identified as the value chain.In addition to the firms own value-creatingactivities, the firm operates in a value system ofvertical activities including those of upstreamsuppliers and downstream channel members.*To achieve a competitive advantage, the firm mustperform one or more value creating activities in away that creates more overall value than docompetitors. Superior value is created throughlower costs or superior benefits to the consumer(differentiation).
*Absolutely Nothing Of What I have Covered Earlieris Relevant Today. Let me show you why?
**For Any of Porters Generic Strategies (&Positions) There are between 30-5000companies in every industry from Automotiveto Software Services. Everything else CeterisParibus Positioning by itself is irrelevant interms of a Competitive Advantage. I REST MYCASE.**Nothing else*
** Patents and trademarks – Every Patent can be worked around as is or when new Techniques and Technologiesevolve. In some cases where you can’t its easier to avoid THE NONSENSE and do something else.* Proprietary know-how – What????* Installed customer base – Nobody owns Customers. They are getting pretty rational they will go where ever theyfind better value, reliability, innovation or experience etc.* Reputation of the firm – It’s a matter of time *Ticking Time Bomb* if you rely on this to protect you from thecompetition.* Brand equity – Based on Irrationality. As transparency and knowledge becomes free Brand Equity becomesirrelevant or a useless protection against competitors.* Prof. Porter made this Theory in the 20th century. Today its not like you will be trying to want to start a businessand need an oil well, coal mine or something like that which nobody else can acquire.* Also its not that you will hide behind Government Protections, Licenses and Subsidies to run your world changingbusiness. It is not only proven that those things are disastrous for competition and excellence, but those things aregetting extinct very quickly. Or in the best case they are good for a start but never can be a Sustained CompetitiveAdvantage.* When you are starting your business Patents & Patent Trolls are the only ones that will give you misery. They needto be dealt with carefully. But again even if you file 1000 Patents today, rest assured your competitors will kill youanyway.* Golden Rule: There is No Resource Or Capability that exists today except for niche’s like Space, Airline Engineering,etc. which means anything in terms of Competitive Edge. Absolutely Nothing!!! Zilch… If you are planning on relyingon any of these you are fooling yourselves.
** On The Other hand there is a Growing List Of Companies which claim “People are our Only SustainableCompetitive Advantage”* But that statement is very far from true. People are free to move about. Yours today, a million dollarslater and tomorrow they are mine. And they control the source of Production and they bring everythingI need to Produce with them, coupled with what I already have - I’m in business baby!!!* So what is it?* We define Geniuses as people who can Learn and Learn How To Learn better than everyone else. Whichresults in exponential capability growth and performance edge.* So the answer is, People BY THEMSELVES are NOT your only sustainable competitive advantage…* Individual & Organizational Learning* Learning, Unlearning and Relearning* Learning how to learn* All organizational structures, tools, policies, procedures, processes, leaders, champions, cultureand ecosystem integration that help individuals and your organization learn by themselves andtogether collaboratively.* The entire process of running the organization ingrained in which Organizational Learning Happensand the Learnings are Applied To Deliver Business Value to the Customer.* All of that put together… are YOUR ONLY SUSTAINABLE COMPETITIVE ADVANTAGE EVER!!!!* Everything else is IRRELEVANT TODAY or was relevant centuries ago and makes no sense today.* Sorry to Dissapoint you Strategy By Design Strategists…. Emergent Strategy Rules!!!