Competitive advantage is what makes a company more successful than its competitors, and keeps them from challenging its dominance.
Story: Good Luck Attacking The Castle
Why are some companies more successful than others? Why do people keep buying the same brands year after year? What’s the secret of businesses like Google, Nike, Starbucks, Netflix, Apple, and Coca-Cola?
The answer is competitive advantage.
Think of these companies as a castle with a ‘moat’ around them – an invincible, invisible barrier protecting them from competitive intrusions.
In each case, the ‘moat’ might be something different: better real estate locations (Starbucks), better celebrity endorsements (Nike), easier to use devices (Apple), broader programming selection (Netflix)… you get the idea.
In each case, it’s something competitors can’t easily replicate, and it’s a sustainable advantage that can last for years and even decades.
Call it secret sauce, DNA, whatever you want… companies either have these unique, dominant advantages or they don’t.
For many years, there was a saying at Google that “fast is our favorite feature.” Because it turned out that speed (of loading search results, email, maps, videos etc.) was something users really wanted.
And Google was so far ahead of its competitors on speed, it became a key part of their reputation and competitive advantage (moat), which made them untouchable by competitors.
It usually takes more than one thing to give a company a sustainable competitive advantage. Not just better quality, selection, speed or taste. But also better pricing or availability. Or maybe a great culture where employees are laser focused on making customers happy.
A strong competitive advantage, once built up, can be insurmountable. The strong get stronger, and success leads to more success.
Until the market changes – which it eventually always does – and customers want something very different.
In the meantime… good luck storming the castle.