3 Laws Creating Competitive Advantage For Your Business
Science has given us several fundamental laws which describe how our world
, and the entire universe for that matter, will always operate. Take Sir Isaac Newtons three laws of motion or the three fundamental laws of Thermodynamics as an example. From these seemingly simple laws, much of our entire complex world can be described. Modern scientists and physicists are still searching for the ultimate universal law, a theory of everything, which will capture the very nature of the universe mathematically. Until they succeed, this article will now present the three laws of creating competitive advantages for your business. I urge you to use their power wisely.Before you read anything else, I want you to ask yourself two questions. What is the one thing that my business does better than anyone else in my marketplace? Can you state it within the context of your Business Center of Gravity (BCG)? If not, I urge you to go back and answer that question after you finish this article and have put some thought into it. Until you can answer that question, your business will continue to struggle.
Now, was your first answer related to differentiating your product or service? Odds are that it was. The two basic forms of strategy suggest that a business will pursue a strategy of either cost leadership by achieving the lowest price or one of differentiation where specific attributes of a business set it apart from all others. The following laws correlate creating competitive advantages through differentiation as we encourage the pursuit of a differentiation strategy over a cost leadership one.
The first law of competitive advantage is the principal of conservation of differentiation. This law states that competitive advantages based on differentiation are neither created nor destroyed, they can only change form. This is critical to understand because in an ultra-competitive marketplace, a competitive advantage will not remain an advantage indefinitely. Remember, your competition as the ability to adapt. The consistent transformation to new competitive advantages is what will generate long term cash flow and prevents the erosion of your strategic positioning.
The second law of competitive advantage is the principle of the constant factor rule in differentiation. This rule allows you to separate constant factors of your business outside of your business model and concentrate on differentiating the business itself. In other words, there are certain things that are required to be done by any business and certain industries require certain things to be preformed. Such constants must be examined separately from the truly differentiating factors of the business. For example, just because a wedding photographer delivers photographs to her clients, this alone does not giver her competitive advantage in the wedding photography industry.
The third law of competitive advantage is the principle of Business Center of Gravity (BCG). This law says that a competitive advantage is proportional to the significance of the BCG times the impulse of the business in the market. A Business Center of Gravity is what your business cannot function without and is directly linked to what your customers and clients cannot function without. The significance of your BCG times the force your business exerts in your marketplace over time directly results in the influence of your competitive advantage on your ideal clients. This means that you must understand and know your Business Center of Gravity as well and create massive and rapid forceful actions within your market if you are to truly leverage the power of your competitive advantage.
With these laws in mind, it is important to understand that competitive advantages are generated by the communication of the Business Center of Gravity and that creating new competitive advantages is critical to business success because your differentiation will erode over time. A good fourth law would be to forget the Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis. It has useful applications for keeping people busy, but within the context of the laws of creating competitive advantage it is unsupported and will not help you in creating true and powerful differentiation. Just like the greatest scientific laws that describe movement and energy, the laws of creating competitive advantage will provide you with a clear and actionable understanding of the nature of your business so that you can generate revenue by truly leveraging your differentiation.
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