- How do you gain competitive advantage
over your competitors?
This is an important question
that every for-profit company's executives
should ask themselves.
Is the answer to that question
that would've been provided 20 years ago still relevant?
Let's have a look.
The author of the seminal work on Competitive Advantage,
Michael Porter of Harvard Business School,
noted that the sources of competitive advantage include:
cost leadership, aiming to become the lowest cost producer,
differentiation focus, differentiating within one
or a small number of target market segments,
and differentiation leadership, targeting larger markets
to gain advantage across an entire industry.
These remain of interest but there's nuance
that needs to be taken into consideration,
bearing in mind the changes
that the digital economy have wrought.
It's important to bear in mind that customers
have more complete and up-to-date access to information
about your product and your competitor's products.
Customers, especially younger ones,
seek an emotional connection
with the products that they use.
Customers are increasingly demanding
that companies scale their solutions in a sustainable way.
Finally, it's important to out innovate the competition.
As my firm works with companies
going through digital transformation,
we talk about six sources
of competitive advantage in the digital age:
stickiness, barriers to entry, inimitability,
trust and love, scalability, sustainability, and speed.
Let me explain each with an example from one of the
fastest growing enterprise software companies in history.
The workplace communications platform Slack.
First stickiness.
Slack is an incredibly sticky product.
The more a team uses Slack, be it sending messages,
documents or integrating other services,
the more valuable Slack becomes
and the harder it is to move to a competing service.
Slack users are connected to the app
for an average of 10 hours on weekdays,
and they're active on the app for over 140 minutes each day.
Barriers to entry.
The workplace messaging space is subject to network effect
where a product gains additional value
as more people use it.
While Slack was able to grow rapidly
thanks to the strong word-of-mouth it generated,
the market now appears closed to all but the largest players
with existing user bases, like Microsoft for example,
and they have not been immune from the gains Slack has made.
Inimitability.
Slack's product is not radically advanced.
In fact, the key differentiator is that it's easy to use.
It has an intuitive interface
and focuses on doing a small number of things very well
instead of trying to be everything to everyone.
As a result, they have a loyal community
that uses and develops for the product.
While the product itself is not hard to clone,
the community is.
Trust and love.
Slack's easy-to-use product combined with
its authentic funny and transparent voice
enables the company to build credibility with its customers.
Scalability.
To ensure Slack's system could scale as the company grew,
it developed a team specifically tasked
with scaling the product.
Sustainability.
Slack is focusing on three strategic priorities
to ensure its business is sustainable.
One, platform play.
In a bid to become the operating system of the office,
Slack is investing in a vibrant ecosystem of tools and apps
that integrate with its platform.
Two, enterprise.
Slack Enterprise Grid
is their product for larger organizations,
which allows it to compete with Microsoft Teams
and other competitors.
Three, intelligence layer.
Slack is leveraging machine learning
and artificial intelligence to help make
the information shared on Slack more useful.
The last competitive advantage is speed.
Slack is solely focused on its chat app
while larger competitors, such as Microsoft or Facebook,
have many competing priorities.
This enables them to move quickly
with a laser-like focus on what they do best.
Plot your products against these six factors,
where are you succeeding relative to the factors
and where are you falling short?
Where you have further to go relative to any of them,
bring together a diverse set of teammates
and develop thoughts about how you can capture
the advantages of each.
In the digital age, these factors will help you gain
and keep a strong footing for the future.