According to a study conducted by McKinsey & Co., 47% of global executives surveyed do not believe that their organisation’s strategies effectively create an advantage over competitors. Instead, they described their strategies as focusing on operational effectiveness and imitating undifferentiated best practices, which do not qualify as genuine strategies.
Many individuals often waste their time and talent on activities that do not contribute to gaining a competitive advantage. It is important to assess how much time and effort your team is spending on such activities. Jorgen Vig Knudstorp, the former CEO of the Lego Group, emphasised the importance of focusing only on areas where the organisation holds a unique advantage to restore the company’s brand and financial success.
Competitive advantage can be defined as offering superior value through differences in capabilities and activities. These three elements—capabilities, activities, and offerings—serve as the foundation of competitive advantage. Capabilities refer to the assets or resources of a business, activities are the actions taken to create value using those resources, and offerings represent the value received by customers resulting from the capabilities and activities.
If you determine that your organisation lacks a competitive advantage, several options are available to help achieve it:
- Modify the offerings by reconfiguring capabilities and activities to generate new outputs. For example, Marvel Comics transformed their original comic book characters and stories into action films, video games, Lego sets, and more.
- Develop or acquire new capabilities through unique assets or resources. An example is the Oakland Athletics baseball team in the early 2000s, which developed a sophisticated sabermetric approach to scouting and assessing players.
- Influence the target customer’s perception of value by highlighting the relevance of specific decision-making criteria. Leon Restaurants, for instance, emphasised the importance of quality, healthy ingredients and pioneered the concept of fast-casual restaurants.
- Explore new areas where competition has been stagnant and migrate value into those domains. Tesla, known for its high-end design of electric vehicles, ventured into the automotive industry with a unique approach to revolutionise the market.