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For quick reference, I consider there are four primary source-groups from which competitive advantage can be built, thus creating the strategy.

Not all four are relevant to every business – many competitive businesses draw their advantage from only one, or combinations of more than one. There is extensive synergy between source-groups and each group is not exclusive. However, the more groups present in a business and present in greater strength, the stronger the competitive position of that business will be.

Strategy built from at least two source-groups is essential.

The primary source-groups are as follows:

2.1 Technology

•Proprietary, e.g. patent/trademark/ copyright

•Constant innovation

•Production systems

•Integration

•Design

When the technology can be patented, a period of competitive advantage can be secured by the inventing company in exchange for publishing the invention for competitors to see. But securing trademarks is a lengthy and expensive business, often delaying and absorbing funds that could otherwise be spent on promoting rapid market entry.

Patents can be contested or even ignored by competitors. Kodak famously ignored the patents held by Dr Land, inventor of the polaroid camera and launched their own copy-product in full knowledge that eventually they could be successfully sued and be forced to pay reparations. In the ultimate, the value of a patent is measured by your financial ability to defend it. If your technology is truly innovative, forming a joint-venture with a large rich company or partner can help to protect and respect your patent; potential copiers will recognise your JV partner has deep pockets and the wherewithal to financially defend your IP, whereas you alone, probably do not.

Many companies do not seek legal protection for intellectual property. IP development is often so rapid that trying to secure protection is not worthwhile. Instead, they build on a stream of innovations, rapidly bringing them to market coverage and extracting as much value as possible before competitors enter the field. By the time competitors begin to get established, the company is bringing forth new innovations and updates. Constant innovation refreshing the competitive offering can provide a stronger strategy than relying on an historical product development protected by patent.

Technology applied to a production process or materials is less easy to copy and can be kept proprietary for quite long periods.

Similarly, the vertical or horizontal integration of technologies can be so complex that competitors cannot easily unwind it in order to copy it.

2.2 Cost Leadership

•Volume economics, scale

•Purchasing, supply-chain

•Productivity

•Physical distribution

•Sales & distribution channels

•Quality efficiency

•Production efficiency

•Design

Price leadership is not Cost leadership; price is an arbitrary decision which may or may not reflect true Cost leadership. Price leadership that is not underpinned by real Cost leadership is not sustainable and its competitive advantage mostly momentary.

Cost leadership is not just a strategy to pursue when no alternatives exist but can be a key to pre-empting competition and to build or hold share in specialty segments against product imitators.

Cost leadership is best achieved by striving for it in every part of the business structure; it is of no value to secure a cost advantage in one part of the business only to lose it again in another part. Each element contributing to total cost must be rigorously examined if an objective of cost leadership is pursued. When the ultimate cost position is reached, the process to secure cost gains should begin again immediately, as the environment is constantly changing.

The benefits of scale economies are often a mirage. The failure of many acquisitions and mergers does not just occur for cultural reasons. It comes from the assumption that being bigger will automatically yield scale economies. Often, two weak businesses merging just create one larger weak business. Economies and strengths of scale have to be actually achieved through proaction.

Lower prices for consumable materials must be secured based upon the volume of purchases; lower overheads per unit of delivery must be attained; investment in higher-volume productive equipment must be made; logistical economies based on volume must be achieved, and so on. Cost leadership is driven – it does not just arrive.

2.3 Positioning

•Brand image

•Identity

•Differentiation

•Consumer appeal

•Perceived value

•Customer service

•Communication

•Quality & consistency

•Location

•Selling methods

•Distribution channels

In modern markets, a high percentage of businesses are built primarily on strategies drawn from Positioning and most others must consider a positioning-strategy as essential.

Years ago, an excellent educational film was produced by a man named Trout, called “Positioning: the battle for your mind” the lessons and essence of which is perfectly valid today. I recommend it for viewing if you can find it.

In synopsis, Trout describes how an array of brand and product perceptions fixes the status and value of the brand/product in our minds and once fixed and reinforced, that position is difficult to shift. (Think: Rolex, BMW, Chanel, Macy’s – and Citizen, Walmart, Target).

The aspects of positioning listed above are highly inter-related and mutually inter-dependent and must be considered collectively to avoid conflicting objectives. Selling methods and distribution channels define the brand position and identity and must harmonise with the selected positioning-objective. The communication – by message, chosen media and delivery – must carry the perceived value and the brand image. Customer service, quality and consistency must support the consumer appeal and the brand position.

All must serve to establish the company/brand/product differentiation in the mind of the consumer. When markets are cluttered with brands, products and services, or your new business is planning to enter a strongly-competitive market segment, differentiation is vital. The objective is to create recognition and separation – the perceived, visible, inferred or measurable difference between brands.

Having achieved that – and measuring it by consumer research – all your subsequent actions with regard to the brand/product, must be consistent with the position-objective. Simply put, an up-market-positioned brand/product is not supported by price-discounting, mass-market distribution channels, inconsistent/poor quality, or obviously-cheap packaging.

Nor will a high-volume mass-market brand/product objective be achieved with high-prices and restricted distribution. Choosing to position as a low-price/high volume brand/product is perfectly sound, but to be successful, it’s imperative that the strategic objective must be to attain Cost Leadership.

2.4 Information Technology

For those businesses whose primary function is IT, strategy should recognise elements of the source groups above.

For all others, consideration must be given to how IT is beneficially applied to the source groups above in order to strengthen, support and deliver the strategies. Its application is vital to them all. It drives innovation, achieves production efficiencies, and is basic to design. IT systems and processes are essential to Cost Leadership, productivity, supply and delivery logistics, quality improvement & maintenance. All aspects of Positioning are driven and/or enhanced by the application of IT.

When the business’ primary function is IT or a development from IP/Research, the strategies should consider:

•Identifying a specific product

•Time to market

•Securing market penetration/acceptance, one niche at a time

•Building market share in one niche before entering another

•Support

•Enhancement train

I identify and stress these six elements because the nature of IT is constant innovation, destructive improvement, and new development. This is a fast-flowing river of continual change from which an actual product must be identified and chosen, then brought to commercialization by securing market acceptance and building share while the river of development continues. The benefits derived from the ongoing development are then brought to the established market through enhancements, thus demonstrating innovation and strengthening Positioning.

All too frequently, IT professionals are swept along by the current in the development river, fail to identify a marketable product because better developments are always on their near horizon, take too long to get a product to market and fail to secure significant acceptance, don’t build market share, burn thru funds and finally crash.

Developing and implementing strategies addressing the points above should ensure a positive outcome.

(Of course, high-technology developments arising from university research programmes often display the same continuous flow of development as IT and are prone to exactly the same weaknesses. To succeed, they also must apply the same six elements, above.)