Your competitive advantage(s) is the foundation, the cornerstone of your strategic plan. It is what you, your company, or your department does better than anyone else. It’s what makes you unique. It’s why you’re in business, and more importantly, why your business continues to prosper over time.
The No. 1 attribute Warren Buffet — arguably one of the most successful investors in the world — looks for in a company: “Sustainable competitive advantage,” he once told an interviewer. Buffet often says, “It’s the moat that protects your company.” If one of today’s most successful businessmen puts competitive advantage at the top of his list, you should, too. But what is it exactly?
The sustainable part refers to your ability to continue to do those activities over a long period of time. And, yes, you can have more than one advantage, and you can develop advantages as well. You don’t have to possess them all at this moment.
The importance of understanding your competitive advantage can’t be emphasized enough. When you really have it nailed down, it helps you and your staff recognize the following:
Which opportunities to pursue and which to pass by
Where to allocate resources and where to cut back
How to do what you already do well even better
How to know the difference between an opportunity and a distraction
When to outsource (to another department or externally) and when to keep the job in-house
Throughout your planning process, you evaluate every part of your plan to determine whether it supports or detracts from your competitive advantage. In the process, you discover what draws customers to buy the product or service from you instead of the competition.