One day I met an ex-professor of mine in the line at the bakery. It came in handy, because at the time, I was stuck writing about 'sustainable competitive advantage' in my first business plan . Everyone in college knew (and he made a point of remembering) that he had been a student of none other than strategy guru Michael Porter.
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I grabbed the opportunity: “Hi professor, do you remember me? I am writing a business plan and I have a big question: how can I discover my competitive advantage? ” He fired, without blinking, the contents of slide 38: “The competitive advantage exists when the company is able to offer the same benefits as the competitors at a lower cost (cost advantage) or deliver benefits that surpass those of the competing products ( differentiation advantage). Another thing: competitive advantage is not created, it is not discovered. It is not hidden there, waiting to be discovered, you need to develop it ”, added the professor.
- "Yea! I was reading the slides from your class, but how did I .... ”
- “To develop a competitive advantage, the company must have resources and capabilities that are superior to those of its competitors. Without that superiority, competitors will simply copy what your company does and any advantage will quickly disappear. Resources are those assets that your organization has that few competitors can easily acquire, such as patents, brands, installed base of customers and reputation. Capabilities refer to your organization's ability to use its resources effectively. ”
This was slide 52! I had read those slides several times but I still had no idea how it could help me in practice. I took courage and said something that I always wanted to say during your classes: “Teacher, these definitions may make sense for GE, Nike, Coca-Cola and Gilette. They have patents, brand, dominance over distribution channels, secret formulas, have Warren Buffet and Jorge Paulo Lemann as a partner ... I am starting now and it is not realistic to imagine that I will have access to resources like these. What can I do?"
He smiled, gave up the queue and after asking for another coffee, asked the question back (teachers have the habit of answering a question with another question): “Do you know what the first sentence of that 1979 article by Michael Porter is and which gave rise to to all this? 'The essence of strategy formulation is dealing with the competition.' What doesn't work with this concept for an entrepreneur? It's just that it becomes a matter of beating your competitors. Build a comfortable position for your company and stay there, entrenched, defending yourself from competitors. The entrepreneur cannot afford this luxury. Entrepreneurs should instead be thinking about how to satisfy their customers. "