Competitive Advantage Research: Why it is Essential

Many peo­ple speak about long-term com­pet­i­tive advantage—an intri­cately struc­tured and ambi­tious plan that estab­lishes a nearly impen­e­tra­ble pres­ence in the marketplace—but few peo­ple actu­ally work on it.  Fewer peo­ple talk about short-term com­pet­i­tive advan­tage, and even fewer launch ini­tia­tives to improve their short-term com­pet­i­tive advan­tage.  These peo­ple don’t under­stand or can­not see the gains asso­ci­ated with an effec­tive mar­ket­ing cam­paign based on mar­ket per­cep­tion research.

Short-term com­pet­i­tive advan­tage is eas­ily accomplished and comes pack­aged with many benefits.  It can improve your sales—without increas­ing asso­ci­ated costs—bolster mar­ket­ing con­ver­sions and increase your mar­ket clar­ity.  Mar­ket clar­ity is vital in order to “see” your tar­get mar­ket, how you design and develop your “touch points” to cre­ate the best whole prod­uct, and deter­mine how clearly your tar­get mar­ket “sees” your prod­uct and service.

What is Competitive Advantage?

Sim­ply put, creating com­pet­i­tive advan­tage is hav­ing a leg-up against every­one else in the mar­ket.  For tech­nol­ogy com­pa­nies, this could indicate own­ing and mar­ket­ing a tech­nol­ogy that no one else has, or offering a service that is implemented in a different manner that previous.   Another exam­ple would be cre­at­ing an effec­tive web­site with the finest com­pet­i­tive advan­tage mes­sages to your tar­get audi­ence.  Build­ing web­sites used to take real work, but now that mar­ket­ing tech­nol­ogy has evolved, they’re eas­ily made and, con­trasted against com­peti­tors, so you can offer exceptional and stream­lined cus­tomer expe­ri­ences.

Short-Term vs. Long-Term

Obtaining short-term com­pet­i­tive advan­tage will not esca­late you to a posi­tion where you will not need to labor anymore to maintain this advantage.   It’s meant to essentially give you a quick snapshot of your weaknesses and strengths, as well as a glimpse of the mes­sag­ing bat­tle­field ahead.  Alter­nately, long-term com­pet­i­tive advan­tage is developed from unique positions in the market, so should you expe­ri­ence unique small com­peti­tors that are bet­ter than you, you’ll always have your name, your brand, your pres­ence and your exclusive mar­ket­place advan­tages that will assist you to main­tain, and even boost your sales for a long time period.

Placed side by side, long-term com­pet­i­tive advan­tage has the most attractiveness, but it’s often so dif­fi­cult to imple­ment, com­pa­nies invest count­less hours craft­ing a plan that’s (some­times) an epic suc­cess or (mostly) an epic fail­ure.  That’s why—specially for expansion-stage firms—short-term com­pet­i­tive advan­tage should be a more attractive and obtain­able short-term goal.

The Start­ing Line: Prepa­ra­tion and Data-Gathering

As I said ear­lier, cre­at­ing short-term com­pet­i­tive advan­tage represents a much simpler task than its long-term brethren—but that’s not to say it doesn’t require thor­ough prep.  Here’s how to start:

What’s Your Ini­tial Perception?

Initially, outline your ini­tial per­cep­tion of what the mar­ket par­tic­i­pants will say.  Frequently, com­pa­nies avoid the effort of com­pet­i­tive advan­tage research under the assump­tion that they already know what their tar­get audi­ence wants.  While this may be true in some cases, sur­prises appear around every corner—you will prob­a­bly dis­cover you were actu­ally miss­ing vital ele­ments impor­tant to your cus­tomer base, or, bet­ter yet, that you were completely off base the whole time.

What Does Your Tar­get Audi­ence Desire?

Hypoth­e­size the buy­ing cri­te­ria (other than price) that your tar­get prospects may value as an essential element of their operations.   Test these cri­te­ria with a few prospec­tive buy­ers to make sure you’ve hit it some­where within the ball­park.  Realizing the desires of your tar­get audi­ence beforehand will help you create a solid list to test when calling a larger group of prospec­tive buy­ers.

Tar­get Audi­ence Per­cep­tions: You vs. the Com­pe­ti­tion

Now that you have a list of possible criteria your target audience will favor, pull out your list of com­peti­tors.  Don’t have one?  Get to work.  How are you sup­posed to know what you’re up against with­out a hit list?  Once you create a tar­get list, nar­row it down to the 2–3 com­pa­nies you want to conquer the most.  Even bet­ter, pick the one you com­pete with most fre­quently if you can.

Once you have a thor­ough list (that leaves some room for ad-libbing), ask the fol­low­ing ques­tions of your tar­get audience:

1. What cri­te­rion is impor­tant in your buy­ing deci­sion?   In order to receive an unprompted response, try to leave this question completely open-ended.
2. How impor­tant is each cri­te­rion, includ­ing the hypoth­e­sized cri­te­ria from your list, on a scale of 1 to 10, 10 being the most important?
3. How good are each of the com­peti­tors (includ­ing you!) on a scale of 1 to 10, 10 being the best?

Repeat steps two and three until you have the answers to what’s impor­tant and you know how your com­pany fares against oth­ers.  Col­lect a rea­son­able sample—20 to 30 com­pleted sur­veys should be sufficient for your purposes—then com­pile the final results and devise an orga­nized struc­ture detail­ing what cri­te­ria is essential and how your com­pe­ti­tion fares against your own strengths.

Cre­ate a Short-Term Com­pet­i­tive Advantage

Now that your data has been retrieved and orga­nized, you’re ready to develop your short-term com­pet­i­tive advan­tage.  Here’s how:

Change Your Mar­ket­ing Mes­sag­ing

Minimize your weaknesses and highlight your strengths.  Take a look at some of the adver­tise­ments for the Droid X.  They are obvi­ously blast­ing the iPhone 4’s antenna prob­lem and bypassing its own weak­nesses.  While you don’t nec­es­sar­ily need to go on the offen­sive, it’s impor­tant to keep your soft spots out of (and move your per­ceived advan­tages into) the lime­light.

Determine Doable Short-Term Changes

Your first response to achieving your customer’s perspective is to adjust your touch-points and essentially go back to the drawing board.   Avoid this impulse.  Instead, stay focused on doable goals—short-term changes that will improve your standing.  These changes may appear in the form of prod­uct devel­op­ment, pro­fes­sional ser­vices, cus­tomer ser­vices, or other mar­ket touch points.  The easiest things to change are your mar­ket­ing mes­sages.  What mes­sages can high­light your per­ceived strengths?  What mes­sages can min­i­mize your weak­nesses?

Utilizing Exter­nal Research Resources

If you are experiencing difficulties start­ing your own short-term com­pet­i­tive advan­tage research process, there are plenty of com­pa­nies out there will­ing to help you out—for a price.  Outside com­pa­nies will inevitably do it better—especially if this is your first time around—and are able to make the calls double-blind, ensure you’re call­ing into an ade­quately spe­cific tar­get, and help you analyze data in case it doesn’t clus­ter well.  Still, you should try it your­self.   You’ll learn a lot, and this acquired knowl­edge can only bol­ster your company’s com­pet­i­tive edge.

There’s also some read­ing you should do.  Check out Jaynie Smith’s Cre­at­ing Com­pet­i­tive Advan­tage—which is my go-to book for the process.

Results

The fin­ish line of your hard work should always provide with it stir­ring results.  Short-term com­pet­i­tive advan­tage research deliv­ers.  The Silicon Valley Insider shows charts that are a great illus­tra­tion of the types of results you can expect to get.

In these exam­ples, the cri­te­ria that users use to choose their mobile search engine is massively dif­fer­ent from the cri­te­ria they use for their desk­top search engine.  The chart does not have the per­spec­tives of the rel­a­tive com­peti­tors, but with this data a search engine provider could see how impor­tant it is to put effort behind cre­at­ing a user friendly inter­face and speed­ing up response time.  The chart also sig­ni­fies that perhaps the attack against Google should be in mobile because it is not as impor­tant to have the default search engine.

Repeat this prac­tice every year or two to see how your tar­get prospect’s cri­te­ria is changing as well as how you and your com­peti­tors fare as it relates to mar­ket per­cep­tion.  This is espe­cially impor­tant in the tech indus­try as the evo­lu­tion of prod­ucts and design are evolv­ing in a rapid pace.  Also, if you increase or adjust tar­get seg­ments or change your prod­uct con­sid­er­ably (for example, by adding a mobile inter­face), undertaking this research for your new seg­ment makes sense, par­tic­u­larly if it differs from your prior seg­ments.  Basi­cally, short-term com­pet­i­tive advan­tage research will keep you active, informed and on your toes, with­out drain­ing your resources or time.

What else is it good for?  Ven­ture fund­ing.  While you may have an intu­itive grasp on your tar­get prospects’ desires, bring­ing a clear-cut, ana­lyt­i­cal case to the table will impress poten­tial investors more than relying on a supposition.

Besides—and beyond—everything else, com­pet­i­tive advan­tage research answers the ques­tion of why you are dif­fer­ent from every­one else.  It can help to assemble core company brand val­ues; it will also help with mar­ket positioning and repo­si­tion­ing, and can help you deter­mine what you need to improve in your business in the longer term.  Solid, repeat­able research can help form your organization’s iden­tity, not only to your team, but to the public.

Scott Maxwell is the founder and Senior Managing Director of OpenView Venture Partners and spends all of his time working to build great companies.

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