Competitive Advantage is Temporary - What Can You Do About It?

5 min read

The age of a stable and predictable business environment is gone. The norm is disruption and dynamic competition. In this new business environment, there is a need to realize that having a competitive advantage is no longer just about the product you provide but about the experience as a whole. In our post on ‘The Mechanics of Experience Design we noted how having a great customer experience will gain customer loyalty and trust, which will help grow your business. It’s a way to gain transient competitive advantage, but in this new dynamic environment, you’ll need to continually adapt to stay ahead. Competition is no longer isolated to separate industries and territories. Rather it is an ecosystem with quickly eroding boundaries.

While companies like Apple have created a ‘deep moat’ approach, by creating an ecosystem that locks its users in, therefore, protecting itself from competitors, companies like Uber have used the logic of the turnstile to get as many players involved. Initially it involved getting as many people as possible through the gate to use their app and build a loyal following. Uber’s initial success was determined by two innovations: a superior user experience enabled by their smartphone app, and a rating system for the drivers. Initially, these were powerful innovations that were later copied by Lyft, Gett, and Grab among others. Speaking of Grab, it stopped being a copycat to Uber and became the everyday super-app for consumers in Southeast Asia. The new competitive advantage for Grab is centralized around digital payment within the ecosystem that offers services in various verticals. Digital payment allows Grab to facilitate multi-sided interactions in any verticals – food delivery, retail, mobility, insurance, and other sectors.

Apple is a textbook example because their success in the mobile electronics market is significantly influenced by their competitive advantage in the field. Apple has built a valuable brand that sways people to choose their company’s products over the competition, and in 2017 Apple was the world’s most valuable brand worth more than $184 billion. But competition from Samsung and other brands has forced Apple to rethink their transient business advantage. In one of their many ways to stay competitive, Apple has diversified by recognizing Apple Distinguished School to promote technical education and innovation. By getting a young and malleable demographic to use its products from an early age, Apple is creating a loyal fanbase that will more likely stick with Apple products throughout their working professional years.

Apple’s certification is given to K-12 schools and universities that have a track record of technological leadership in education. Apart from being the 4th fastest-growing university in the U.S., Maryville University is also an Apple Distinguished School for 2018-2021, a classification that benefits both school and tech company. For schools, it provides a level of prestige, which in a way is akin to a competitive advantage over other schools. In this case, a known e-learning academy gets the stamp of approval from a tech giant. Alternatively, Apple benefits from wider exposure, approval from the academic community and the mindshare of a larger demographic that will buy its products in the future, thus, further elongating the company’s long-term competitive advantage.

In this dynamic business environment, an effective way to take advantage of your transient competitive advantage is not by your competitors; rather define your distinction by listening to your customers. Many companies define themselves as customer-centric but few actually talk the talk and just copy what their competitors are doing. Jeff Bezos of Amazon once said that if you want to stay ahead of your competitors, you must focus on your customers first instead of your competitors. It’s part of the reason that Amazon Web Services is worth more than $10 billion. Focusing on your customers first can have benefits well beyond gaining competitive advantage and pay dividends from customer loyalty.