A competitive advantage is what makes a customer go to your company over another. So what's your company’s competitive advantage? Why do customer’s keep coming back to you?
At Sixth Floor Consulting Group, we like to place competitive advantages into three categories:
Does your business have an advantage based on brands, patents, or some proprietary knowledge? Having a recognizable brand name is a huge advantage over any newcomers; however, this is not completely “bullet proof.”
A company with a cost advantage is able to deliver a product at a price that the competition cannot match. This tends to be an advantage that is very hard to hold on to. Eventually, the competition will catch up.
Many people might consider specialization as part of differentiation. If a company uses either a narrow product range (e.g., stainless steel surgical screws vs. hardware screws) or operates within a small geographic area, offering superior service, that company is developing a specialization advantage. Servicing special needs becomes a means of outperforming larger competitors.
These advantages are based on delivering value to the customer. No competitive advantage is permanent -- not without a great deal of effort on the part of the business. While it's easy to see that cost advantages can be made up, a differentiation advantage also requires effort to maintain. Patents and proprietary knowledge eventually expire, and what may appear to be a strong brand may eventually fade.
Based on this reasoning, we don’t recommend using business applications for competitive advantage. Properly using these tools may certainly be worthwhile. However, misusing any business application, whether it is ERP, Six Sigma, or Supply Chain Management, can do more harm than good.
Can Lean Enterprise be a competitive advantage?
True Lean is a management philosophy, rather than a tool. It uses many tools (5S, Kaizen, etc.) however the first principle of the 'Toyota Production System' is to identify value through the customer’s eyes. That value is increased by eliminating waste. This drives down the company’s costs, allowing it to deliver greater value to the customer.
Lean most looks like a competitive advantage in its ability to drive out complexity. A major premise of Michael Porter, whose writing in the 80’s helped define competitive advantage, is that a company could not pursue both cost and differentiation advantages. In using Lean Enterprise thinking, it becomes possible to deliver both low cost and differentiation (which is usually associated with increased complexity). Using Lean tools, a company is able to cut costs and complexity out of its production processes and continue to deliver options and customization its competitors can’t.
So while you'll want to gain any competitive edge you can, your competitive advantage should be based on what causes your customer to pick your company over any other. Only by guarding and exploiting your advantage over competitors can your company grow and prosper.
We won't tell you what your competitive advantage should be; only you know your business and competition well enough to best make that determination. We can, however, help you to better use the tools you have in your business arsenal. Contact us to help you review your ERP system usage or business processes.