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Harvard professor Michael Porter originally proposed the theory of competitive advantage in 1985.  Porter emphasized productivity instead of cheap labor and natural resources. The chart below identifies basics of Porter's theory - and points to the area where most small businesses strategy exists - Focus Strategy or differentiation. [Image]

So how do you get started and how important is having a competitive advantage or CA? If you start with Jack Welch, the former CEO of General Electric, he said, "If you don't have a competitive advantage, don't compete."  Warren Buffet looks for CA to be sustainable.  Brand and a great sales effort combined with a CA can ensure the success of a company.  And it all starts with asking the question of your customers, "What made you choose me?".

Many businesses think they know their CA or haven't defined it or don't use it. So let's start with what it is not.  CA is not: keeping up with the competition offering free shipping when everyone else is offering free shipping having the lowest price someone else will have deeper pockets the same as everyone else "we have on-time delivery" - who doesn't? subjective "we have great customer service" - doesn't everyone? arbitrary "we're better at..." - 80% of drivers think they are above average cliche "we mean business" - doesn't everyone? So what can CA be? Internal or external the distribution system of Walmart is a huge advantage in many ways Highly visible a distinctive design like the POM pomegranate juice bottle Owning a niche market many small businesses can claim to be a big fish in small pond So how do you determine what your CA is right now? Ask yourself these questions: What do you think your CA is right now? Can you prove it? Do you have the data? Have you evaluated your CA against the competition? Is price part of your CA? Is it sustainable at least for a certain time period? Are there big costs for the customer to switch? Do you have low overhead costs? Do you have strategic intellectual property? Have you established a broad network? Think Facebook or Verizon. Your marketing plan is the key place where your CA resides.  Your brand strategy will support your CA.  Training you employees to be brand ambassadors will be key as well as your slogan or tag lines, logo, website and packaging.  And always review your competitive advantage.  Keep measuring against the competition. Ask if your CA is still important to your customers. Constantly prove that your CA is relevant. Reassess then update your CA and start the process over.