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5 Keys to Differentiate Your Company and Gain the Competitive Advantage
By Marsha Lindquist
When it comes to standing out from the competition, you can focus your company’s competitive advantage on one of two things: 1) price, or 2) differentiation. While price is certainly an effective way to distinguish your company in the marketplace, it’s not always the best choice for long-term growth and profitability. After all, if you’re the cheapest provider of something, you’re going to have to sell a lot more and work a lot harder to realize significant growth. The smarter approach is to focus on your company’s differentiation. Why? Because when customers see all you offer to meet their needs, they’ll choose you over the competition, even if your prices are higher.
Focusing on your company’s differentiation is really about focusing on the resources you have available right in front of you. These resources are your reputation; your customers; your employees and the unique talent they bring to the table; your proprietary knowledge, products, patents, and trademarks; and your brand. As you focus on each of these five aspects, keep the following in mind:
1.Your reputation
Your reputation is what you make it and has to do with how you treat your clients, your employees, your stakeholders, and anyone else who has a vested interest in your company. In fact, the most important thing about any company is its reputation. Realize that every time you’re dealing with people, with your products or services, and with business in general, you’re speaking volumes about your reputation. If you’re not careful how you handle yourself, you can quickly destroy your competitive advantage. Conversely, when you’re mindful of your actions and do what’s right, you will improve your reputation and quickly enhance your company’s competitive advantage. In a world where commodity pricing is the name of the game, your reputation and how people think of you will set you apart from everyone else.
2.Your customers
Everyone in business knows that at any time your competition can come along and potentially destroy your customer base. But if your customer base is solid, that may give you a competitive advantage over a competitor that does not have a customer base at all or who does not have a solid foundation to call upon. Many times, especially in service businesses, a company has only one or two big clients as their main income source. Even though they’re wonderful and big clients who always pay on time, if that’s where the majority of your business comes from, you don’t have a competitive advantage. Think about it…what happens if that one big client goes away? Then what do you do? You need the ability to be agile and quick to respond to changing market conditions. Having a solid customer based gives you that. So treat that one big client very well, but also be sure you develop relationships with other customers so you have a strong base you can always turn to.
3.Your employees
Unless you’re a sole practitioner, your employees are the image your customers see on a regular basis. That’s why you need to work hard to keep your employees happy and eager to assist your customers. In today’s marketplace, a lot of “employee stealing” takes place. That is, if your competitor knows that you have a star performer who could add value to a company, then your competitor might attempt to sway that employee away from you. But if you’re keeping your employees happy, then you don’t have to worry about people leaving you. Realize that without those quality people, your company could quickly take a nose dive. When you lose a major player on your team and you’re a small business, that’s a big hit to you. So find out what makes your employee happy, as well as what makes them unhappy. Do what you can to keep your quality employees and let your competition take the mediocre performers.
4.Your proprietary knowledge, products, patents, and trademarks
Your proprietary items and information set you apart from anyone else because customers know it’s yours and not a “canned” solution. In other words, your proprietary products and information are credibility boosters. You’re letting the world know that you are serious about what you do—to the point that you patent or trademark it so that no one can steal it from you. When customers hear that a company has a patent or trademark on a product or process, they automatically assume the product or process is something special, and that certainly sets you apart from the crowd.
5.Your brand
While your reputation is something the outside world perceives of you, your brand is what you make for yourself. For example, when you purchase a Microsoft product, you know you’re buying a good quality product. You know there’s a team of people working to constantly improve the product with updates. Even if you personally don’t like Microsoft products, as a whole, the company’s brand is stronger than one opinion. As soon as you begin to be known by your brand, then not only do your customers know about you, but the rest of the world knows about you as well. With a strong brand, you become the benchmark—the company that everyone else measures what they do by. When you become identified by your brand, you become the number one position holder, and everyone else falls in behind you and tries to imitate you. At that point, you have to beware, because you could lose that number one position to one of your copycats. So protect your brand and promote it aggressively. The better your brand, the more you’ll stand out in the marketplace.
Differentiate or Die
As you develop each of these five elements, you need to advertise them in everything you do. Incorporate the elements into your mission, your goals, and every fiber of your business. Make sure every plan and strategy you implement focuses on these five things. That’s how you use these resources to grow your business and gain a competitive advantage.
The good news is that when you have a competitive advantage based on differentiation, you’re not worried about money quite as much. Rather, you’re creating value in the marketplace above and beyond your pricing, because you’re being distinctive and difficult to replicate. You’re then able to focus on enhancing your core competencies and sustaining who you are as opposed to sustaining your bottom line. That’s when you can rest assured knowing you’re a solid company with a prosperous long-term outlook.
About the Author
Marsha Lindquist, CEO of The Management Link, Inc., has over 30 years experience as a business expert in Government contracting She has enhanced her clients’ cost competitiveness, improved their contractual positioning, and solidified overall strategies with companies including BP Amoco, DynCorp, and Northrop Grumman. Marsha adds value by telling you what you need to hear. For more information on her, please visit: www.TheManagementLink.com or email her: Marsha@TheManagementLink.com.
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