What is our competitive advantage?
Short Answer:
When your firm can deliver on a brand promise where you have an unfair underlying 10x advantage over the competition – cost, location, speed, etc. SpaceX (for now) is able to put people and things into space for 1/30th the traditional cost. Key is their workhorse engine, the Raptor. Through continuous improvement – what they call The Algorithm — they’ve reduced the cost from $2 million to $200,000.
Longer Answer:
When your firm makes a list of the top attributes of what a niche of customers want in the way of a product or service and then you choose the top one and become the very best at delivering on it – hopefully with some defendable underlying advantage (10x or more) over the competition.
The key book to read is Dr. Frances Frei’s Uncommon Service. What you want is profit share, not market share. Choose the 10% of a broad market where the profit pools are located and then dominate that market with a solution you can be best at. IKEA chose the flat packed segment of retail furniture. This is the most profitable niche since you’re not shipping or storing air and represents roughly 10% of all retail furniture purchased. IKEA then owns over 70% of this niche buy focusing on this one thing – designing and successfully retailing flat packed furniture. And it’s their scale, today, that helps them defend this niche, being 10x larger than any other competitor.
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