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Asking three key questions

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For a strategic advantage to be really worth something — in terms of the goodwill of your business or your likely financial success — this advantage has to be something that you can sustain over the long term.

I like to think that any really strong strategic advantage should have three attributes:

 The advantage can’t be easily copied by others. The ideal strategic advantage is one that’s really tricky for your competition to copy. Examples are a winning recipe or flavour (think Coca-Cola), a unique synergy of skills within your organisation, or expert knowledge that few others have.

 The advantage is important to customers. Think of the farmers who switched to growing organic produce in the early 1990s, before organics became more mainstream. Many of these farmers did really well because organics were so important to particular customers. (And although the advantage was relatively easy to copy, many authorities required a seven-year lead time with no chemicals before a farm could be officially certified.)

 The advantage can be constantly improved. If you can identify the thing that gives you an edge and constantly work this advantage, you have a strategic advantage that is potentially sustainable in the long term.

When Steve Jobs and Steve Wozniak started Apple, one key strategic advantage was their match of skills (Wozniak’s knowledge of electronics and Jobs’ marketing skills), along with a mutual interest in great design. The synergy of their skills was hard for others to copy, the beautiful design was something that customers really wanted, and Apple was in a position to continually improve and develop this advantage.

Don’t fall into the trap of thinking that because you’re cheaper than everyone else, this is a strategic advantage. Being cheaper than everyone else usually means one of two things: Either your business isn’t as profitable as it should be, or your competitors can grab your strategic advantage at any moment just by dropping their prices, too. Usually, being cheaper than others is only a strategic advantage if you have some special skills, technology or volume of production that enables you to be cheaper.

Small Business for Dummies

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