5 keys to gain a competitive advantage
In the 1970s, executives favored a technique called SWOT analysis to think strategically. They would meet with their team to identify their organization’s strengths, weaknesses, opportunities and threats.
But SWOT is now outdated. Experts say it merely provides a static look at a company and relies on gut opinions rather than verifiable data.
A more reliable way to devise strategy involves resource-based analysis (RBA). Chuck Bamford, a researcher and consultant, has modified the RBA approach to help leaders identify what differentiates their business in the marketplace. He cites five factors to conduct RBA and determine what sets an organization apart:
- Rare
- Durable
- Relatively nonsubstitutable
- Relatively nontradable
- Valuable
Offering a rare resource or capability can make your business exceptional. To define what’s rare, ask, “How many competitors do exactly what we do?” If the answer is one (or none), that qualifies as rare. If the answer is more than one, then what you offer isn’t unique.
Durable businesses separate themselves from rivals by securing their rareness long enough to lock in high returns and sustained profits. These businesses outlast competitors and make it hard for them to invest the funds to catch up.
A business that’s relatively nonsubstitutable means that customers lack viable substitutes if they seek a similar product or service. If shoppers can find other vendors that offer the same or better value, you’re in trouble.
A nontradable business possesses something that it wouldn’t trade to competitors. Examples include holding a patent or intellectual property—or exercising exclusive license to a cutting-edge technology.
Finally, organizations gain value by avoiding price wars and charging more for what they sell.
— Adapted from The Strategy Mindset, Chuck Bamford, CreateSpace Independent Publishing.
