Why You Need Competitive Advantage Research Now!

April 3, 2010

Long-Term Competitive Advantage is something that many people talk about but few people work on. Short-Term Competitive Advantage is something that most people don’t even talk about. Short-term competitive advantage is an advantage that you can create or even just message for in the short-term in order to increase your sales and marketing conversions and to increase sales without increasing your costs (this is great economic leverage and helps to increase your market clarity!).

Short-term competitive advantage is pretty easy to create and capitalize on in its simplest form:

What do your target prospects want?
You get the answer to this question by hypothesizing the buying criteria (other than price) that they perceive as important and then test the criteria with a few prospects to make sure that your list is roughly right. This gets you a good enough list to use by making some further calls to a larger group of prospects.

How do your target prospects perceive you vs. your competitors?
The starter list of competitors is simply the list that you compete against most with your target prospects. With this list, you can make some calls to a large list of prospects.

Once you have the list of possible criteria and the list of competitors, you call a larger number of them and ask a few questions:

  1. What criteria is important in your buying decision? this is an open ended question just to see what they say unprompted.
  2. How important is xyz on a scale of 1-10 where 10 is most important (xyz is one of the items on your list of criteria)?
  3. How good is company abc on a scale of 1-10 where 10 is the most important (abc is the name of a competitor company or your own company)?

Repeat 2 and 3 until you have the answers to what the important criteria rating is and how good each of the competitors and you are.

Once you have a reasonable sample, say 20-30 surveys filled in, compile the results to find the important criteria and who is perceived at being best at each.

Finally, You can create a short-term competitive advantage by doing the following:

Change your marketing messaging to highlight the criteria where you are perceived to be strong and try to minimize the damage where you are weak.

Determine if there are some short-term changes that you can make to your deliverables (through product and development, professional services, customer service, or other market touch points) that will help you get better in the criteria that is important to your customers.

This is a very simple process that anyone can execute. If you want to get more sophisticated, you can spend $8,000 and have a research company help you. They will do it better and they will be able to make the calls double blind, which is helpful, but the key is to do it. You will learn a lot. Also, the company will help you to make sure that you are calling into a specific enough target segment and help you to interpret the data if the responses do not cluster well (because of things like sampling multiple segments where each segment has different buying criteria).

While you can take the tips above and probably get 90% to the right answer with just your staff cost or by spending $8,000, If you really want to do it well and put more effort into it, buy the book Creating Competitive Advantage by Jaynie Smith and or go to one of Jaynie’s training sessions (Jaynie did a session for our portfolio companies a couple of years back and received really positive feedback on it). When you are done, you will have a much deeper understanding of the topic and some very pragmatic advice on how to go about creating competitive advantage.

The Chart below from Silicon Alley Insider is a great illustration of the types of results that you can expect to get.

In this search example, the criteria that users use to choose their mobile search engine is hugely different from the criteria that they use for their desktop search engine. The chart does not have the perspectives of the relative competitors, but with this data a search engine provider could already see how important it is to put resources against creating a user friendly interface and a fast response and perhaps that the attack against Google should be in mobile because it is not as important to have the default search engine.

The response that I hear from most companies is “we already know what the results are going to be,” and most companies probably do know some of the results. The fact is, however, that if you write down your list as well as your target prospect perception of competitive differentiation and then do the research, you will definitely have several “aha” moments with the results and the results will definitely be useful if you use them to make some changes. (btw, if you don’t write down your perception in advance, you are likely to believe that you already knew the answers when you get them even if you don’t because once you see the results they will seem logical).

This practice is a really, really good one to do now and you should repeat it every year or two to see how your target prospect’s criteria is changing as well as how your perception and your competitor’s perception is changing in your target markets. Also, if you add or change target segments or change your product considerably (for example, by adding a mobile interface), doing this research for your new segment makes sense, particularly if it is very different from your prior segments.

Also, if you are trying to get venture funding, this data is highly valuable. Even if you really understand the perception of your target customers intuitively, most venture capital firms will appreciate the analytical approach that you have used to determine the answer and will trust the results more than your intuition. It also helps to answer the question of why you are different and it helps with market positioning and repositioning, which are incredibly important to building a great company for the long term and doing it in a capital efficient manner.

This is why you need competitive advantage research now!

Founder & Partner

As the founder of OpenView, Scott focuses on distinctive business models and products that uniquely address a meaningful market pain point. This includes a broad interest in application and infrastructure companies, and businesses that are addressing the next generation of technology, including SaaS, cloud computing, mobile platforms, storage, networking, IT tools, and development tools.