What is your real competitive advantage?

Competitive advantage is a term that comes up in conversations often. Ask anyone you know about the competitive advantage of their company is, and you will get a wide range of answers.

Maybe it’s technology. Or maybe it’s the distribution network? Patents? Information? People? Business model?

While these may all be true, they are only one side of the coin. Your competitive advantage is on one hand created by your actions, your ability to harness your assets and resources, turning your knowledge, your raw materials or anything else into products, services and experiences that create value. However, your advantage is real only as it has been manifested in the minds of people, as perceived value and meanings. Until that point, it is just action, potential advantage, not real advantage.

The point I am making is this. Your competitive advantage lies outside your company, outside your direct control. Scary, right? Well, no reason to be scared. Your potential competitive advantage is your brand, i.e. the intangible equity of thoughts and feelings you have created through your past actions. And all these actions are branding. Yes, branding is everything you do to affect people’s perceptions of you. It’s not just that logo, slogan or visual. That stuff is rarely what will differentiate your business. Well, that’s how we should define branding to be useful in today’s world.

From a branding perspective, all your heavy investments in production, in factories, technology, in patents, people, you name it — are simply things you do to create perceived value and difference in the minds of people. These are enablers. But these have no lasting impact unless you are able to link the value you create to your brand. This is where branding comes into play. Your brand is what connects your business with people. It is made of nothing but thoughts and feelings. But those thoughts and feelings will either break or make your business. Because those are the same thoughts and feelings we base our attitudes and behaviors on.

The bottom line is this. All the investestments you make as a company should be investments into your customer relationships. If not directly, the causal link should be clear. This starts with a clear understanding of your customer, of who they are, what their aims are, and the purposes behind their aims. When this is clear, you can design your strategy and promise to satisfy their needs and create your advantage. If you are not clear about them, your are shooting in the dark.

When you make the brand the organising principle of your business, you direct everything you do towards creating value for the customers, value that differentiates and makes you the superior choice. When your customers have a clear reason to choose you over competition, that’s when you have real competitive advantage.

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