Strategic Planning: How to Test Your Competitive Advantage - dummies

Strategic Planning: How to Test Your Competitive Advantage

By Erica Olsen

As far as strategic planning goes, having an advantage over your competitors isn’t enough. For your business to be great, it needs to be sustainable and able to endure the test of time. You have to be able to combat today’s fierce market forces and uncertainty.

Think about the graveyard of businesses from the dot-com era. Many of these companies didn’t pass the sustainability test. You don’t want your company to be a distant memory. In fact, you probably want it to live on past your time. And if you’re a department manager, you probably want to see your department continue on instead of being restructured.

Here are the cold hard facts:

  • Roughly 70 percent of all new products and services can be duplicated within one year.

  • 60 to 90 percent of process improvements (learning) eventually diffuses to competitors.

You need to make sure that your competitive advantage is long-lasting and not easy to duplicate. So how do you know when you’ve developed a sustainable competitive advantage? You need criteria to help you gauge your success. Take a look at the following measures to see whether you’re on the right track:

  • Consistent difference: Customers must see a consistent difference between your product or service and those of your competitors. This difference needs to be obvious to your customers, and it must influence their purchasing decisions.

  • Difficult to imitate: Your competitive advantage must be difficult to imitate. You want to have an advantage that your competition can’t easily duplicate or don’t understand how to copy. Often this advantage comes in the form of people, proprietary knowledge within your organization, or business processes that are behind the scenes.

  • Constantly improved: The first two bulleted items in this list must create activities that can be constantly improved, nurtured, and worked at to maintain an edge over your competition. The comparison of Wal-Mart versus Kmart is a great example of how one continued to improve its supply chain management and purchasing, whereas the other didn’t. Unfortunately for Kmart, it lost its edge because it didn’t constantly improve. Wal-Mart invests in ever-refining its product selection and processes.

Reference the following figure to quickly evaluate whether your advantage withstands the test of time. The more responses to the right-hand side of the form, the better, but don’t worry if you don’t pass each one.

Think about how you can add to your competitive advantage to make it even more sustainable. When you develop goals later in the planning process, take action to shore up any areas that may concern you.