Strategic Advantage

Previously, I wrote about strategy as a plan for identifying, defining, seizing upon and defending opportunity. The purpose of strategy is to pursue, gain and maintain an advantage (or set of advantages) for increasing the likelihood and longevity of success related to opportunity that has been seized upon.

Therefore, my definition of Strategic Advantage is presented as follows:

Strategic Advantage increases the likelihood and longevity of success related to opportunity that has been seized upon.

There are various types of strategic advantage that may be pursued. However, not every type of strategic advantage is always advantageous or without its short and/or long-term limitations, especially when competitive market forces are taken into consideration.

Understanding the various types of strategic advantage — including their benefits and limitations — is critical to achieving and maintaining marketing and business success (defined here).

The inspiration for the list below (specifically related to the notion of competitive advantage) is rooted in the work of Michael Porter, now modified and expanded upon for my purposes:

  • Network Advantage. It is often said that who you know is as important as what you know. You are likely to gain a Network Advantage if you connect with the right (meaning helpful, not simply friendly) investors, power brokers, influencers or other individuals or groups with strong network ties.
  • Timing Advantage. It is often said that timing is everything. This is especially true when considering dynamic markets that must respond to your move(s). If the market is not ready for your forward-thinking idea, it may not be the proper time to take action. If, however, you determine the right timing based on a thorough analysis and understanding of marketplace dynamics, you are likely to gain a Timing Advantage.
  • First-Mover Advantage. It is often considered a plus to be “first to market” with an original idea, product or service. You are likely to gain a First-Mover Advantage if you introduce your offering before anyone else. While it can be advantageous to be first to market, the risks ought not be ignored. You may be first because others evaluated the market opportunity and determined it was too risky, meaning you could fail unless you know or do something others have not considered in their analysis. Assuming you are first because yours is a revolutionary idea that nobody else imagined (or had the guts to execute against), the minute you reveal your hand, others can observe your model and replicate it — assuming you do not have a Strong Sustainable Competitive Advantage (see below under Competitive Advantage).
    • First-Mover Adoption Advantage You are likely to gain a First-Mover Adoption Advantage if you arrive first to market with a head start in promoting consumer adoption of your product or service. An additional benefit of this advantage is related to uncontested gain in market share (the percentage of the market that buys from you).
    • First-Mover Brand Association Advantage. You are likely to gain a First-Mover Brand Association Advantage if your product and/or service solves an existing unaddressed (or unrecognized) problem such that consumers associate their positive experience(s) with your brand, earning you their loyalty.
  • Late-Bloomer Advantage. While it may be beneficial to be first to market, sometimes it makes sense to be “late to market.” You are likely to gain a Late-Bloomer Advantage if — after having observed the successes, failures, best and worst practices of competitors, you decide that you can successfully enter the market with a different and better alternative offering.
  • Competitive Advantage. Markets are dynamic, competitive environments with multiple parties seeking a share of the market. In such a competitive context, you are likely to gain a Competitive Advantage if certain aspects of your business (see below) are difficult for competitors to duplicate or excel at beyond your level of performance. If you are able to master the various aspects of your business that give you advantage, providing you with a superior long term position relative to your competitors, you are likely to gain a Strong Sustainable Competitive Advantage.
    • Differentiated Advantage. Is your business model, revenue model, product or service offering different and better than those of competing offers? If so, you are likely to gain a Differentiated Advantage, but only for as long as you are able to maintain it relative to competitive behavior.
    • Cost Advantage. Are you able to keep costs low through operational efficiency and economies of scale, giving you pricing flexibility or larger margins? If so, you are likely to gain a Cost Advantage.
    • Market Advantage. Do you have a dominant position in the market (either through Brand Power or Barriers to Entry Advantage) such that it affords you the luxury of experimentation with pricing and product mix offerings without fear of losing market share? If so, you are likely to gain a Market Advantage.
    • Brand Power Advantage. Do consumers prefer your brand to that of others? Do you have a solid brand reputation with a loyal following? If so, you are likely to gain a Brand Power Advantage such that consumers will consider your product or service offering over competing offers so long as your brand performance and reputation remains untarnished.
    • Resource Advantage. Do you have access (often exclusive access) to desirable resources and assets such as raw materials, patents, trademarks and research & development capability? If so, you are likely to gain a Resource Advantage.
    • Barriers to Entry Advantage. Is it extremely difficult for a competitor to replicate your business model and effectively compete against you given regulatory hurdles, high investment costs, product development costs, market share acquisition costs and other similar impediments? If so, you are likely to gain a Barriers to Entry Advantage. Monopolies are said to enjoy High Barriers to Entry Advantage.
    • Product Advantage. Do you have an innovative product offering that not only excels in form but also in function such that it exceeds expectations and remains relevant despite competitive pressures and changing needs and preferences over time? If so you are likely to gain a Product Advantage.
    • Service Advantage. Do you have an innovative customer experience oriented service offering that takes a product experience to a new level or merely enriches a service experience with tools, technologies and benefits that build long-term brand loyalty? If so you are likely to gain a Service Advantage.
    • Balance Sheet Advantage. Do you have access to liquidity for times of crisis, high competitive pressure, regulatory scrutiny and/or unexpected market turmoil that can bring ruin to otherwise well-performing entities? If so, you are likely to gain a Balance Sheet Advantage.
    • Human Resource Advantage. Do you have access to a pool of high performance human talent dedicated to your success? If so, you are likely to gain a Human Resource Advantage.

While there are clearly numerous ways to gain strategic advantage, there are as many ways to lose strategic advantage given the dynamic nature of the marketplace. The constant tug of war for marketplace viability combined with the various forms of advantage that provide opportunity for upstarts to enter and compete are what make markets — and marketplace competition — fascinating to study, engage in and enjoy.