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Competitive Advantage vs Sustainable Competitive Advantage

        posted by , May 25, 2013

Competitive advantage is something you do better than any of your competitors.

It's the boxer who is unbeatable. It's the company that releases an innovative, industry changing product.

Competitive advantage is illusive. It's difficult to establish. When you do establish a competitive advantage — it's often fleeting.

Sustainable competitive advantage is another animal. It's an advantage that keeps going for many years or decades. Ideally, forever.

Definition: Sustainable Competitive Advantage

A sustainable competitive advantage is something that an organization or individual does better than all competition over a long period of time.

The following criteria can be used to differentiate competitive advantages. They separate the temporary advantages from true sustainable competitive advantage.

1. Tactics vs Strategy

All men can see these tactics whereby I conquer, but what none can see is the strategy out of which victory is evolved.
~ Sun Tzu
Tactics may represent a brief competitive advantage. Strategy may represent a sustained competitive advantage.

Tactics are highly visible to your competition. They are easily emulated.

It's possible to keep a strategy secret from your competition. In such cases, the strategy is difficult to copy.

2. Explicit Knowledge vs. Tacit Knowledge

Explicit knowledge brings competitive advantage. Tacit knowledge brings sustainable competitive advantage.

Explicit knowledge is regular knowledge that can be shared with words and visual communication techniques. Good ideas travel quickly and are difficult to keep secret. They seldom represent a sustained competitive advantage.

Tacit knowledge is knowledge that's difficult to transfer from one person to another. You can watch a golf champion play, get him to coach you for hours on end — you still won't match his skill.

Tacit knowledge includes abilities such as design sense, intuition, emotional intelligence, leadership abilities and decision making skills. If your people have superior tacit knowledge — it's very difficult for your competition to catch up.

3. Resistance Culture vs. Innovation Culture

Sustained competitive advantage is often based on the habits, symbols, norms, beliefs, mission and behavior of an organization. An innovative culture that embraces change and is supportive of creativity may sustain a competitive advantage indefinitely.

A culture that's resistant to change, highly political or disengaged is unlikely to hold on to its competitive advantages.

4. Capital vs. Superior Capital

Superior capital may represent a highly stable and sustainable competitive advantage. If you own all the railways in a country — it's unlikely anyone is ever going to compete with you.

If you own the shop closest to the beach, you'll enjoy a sustained competitive advantage in the local beach balls market.

Next: 7 Examples of Sustainable Competitive Advantage »

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