The New Rules of Competitive Advantage to Grow Exponentially

A company I know created a new cookie concept and wanted to sell it online. This company had primarily sold through retail but wanted to grow it’s online sales channel. But there was a problem: online cookie sales never took off. This wasn’t a surprise, ask people you know if they have ever bought a cookie online. Almost no one I know has. Why? It would have to be an amazingly magical cookie to buy it online. The competitive rules have changed and most companies haven’t realized the difficulty to win in today’s digital landscape. Yet, companies disproportionately win when they capitalize on the New Rules of Competitive Advantage.

New Rule #1 The required competitive advantage has gone from 1% better to 10x.

The old rules of competitive advantage meant you could be 1% better than your competition and win. In a store, the cost to reach out my 3 foot or so arm may burn about 8 calories. If one cookie appealed to me 1% more, that cookie would win. But the new digital-first rules mean the distance between me and the cookie is unknowable, it is an infinite distance of time and space. A cookie needs to be 10x better than any other cookie or option I have to snack for me to purchase it online.

New Rule #2 In the new digital economy, if you aren’t first, you’re last.

In this new flattened digital world, the victor gets the spoils. It’s in this world that the 80/20 rule applies with 80% fighting for survival, 10% being flushed down the toilet and 10% disproportionately winning. These new rules require business owners to be laser focused on where they can win. How do you move into the 10% winning category? Develop a clear competitive advantage. Yet, in my experience few business owners have taken the time to do this. If you haven’t here’s a process to build one:

How to Identify your Competitive Advantage

The first step is to identify what (if any) your current competitive advantage is, to examine your market and where you fit into it.  To do this, go through a Market Analysis process to examine the current landscape of where you play.

Market Definition – Define the market that you sell your solution into and define different target markets (market segments):

  • Industry (eg. Heavy Equipment Manufacturing)
  • Distribution Method (eg. Wholesalers)
  • Company Size (eg. SMB $10-250MM)
  • Geography (eg. US)
  • Market Size (eg. Number of Companies)

Market Research – Look at the current business trends and challenges for the market segments you identified.

  • Market Trends (Industry Reports)
  • Current Situation (eg. Growth or Decline)
  • Total Addressable Market (eg. Number of Companies * Estimated Spend on Problem)

Competitive Analysis – Define the competitive landscape of the market.

  • Market Competitive Analysis (eg. Use Porter’s Five Forces Framework)
  • Review Sites (eg. Evaluate G2 Crowd for and determine what people say about your competitors)
  • Digital Marketing Analysis (eg. Google “Manufacturing ERP’s” to see who ranks from a SEO perspective, who is paying for ads, etc.

After you map out the market, do a deep dive into Customer Analysis to examine your current customers, prospects and sales targets.
Customer Segmentation – Look at your current customers based on the segments you identified. Are there customer segments that are most valuable (percentage of total customers, close rate of sales opportunities, LTV, churn rates)? Start to rank these based on where you win.

Pain/Need/Opportunity Segmentation – Is there any pattern as to why customers decided to go with your solution? Is there any correlation to the segments where you win? Interview your customers and ask questions to see why they selected your solution.

Marketing Channel Analysis – Why do people come to you? For example, on your website what pages do they visit, which ones create the most leads and opportunities? Do a full Digital Marketing Agency Audit to understand where you win and where you lose. Or if you have referral partners, why and when do they recommend you?

Sales Win/Loss Analysis – Look at your recent sales opportunities. Why do you win deals? Why do you lose? Interview the buyer within 10-15 days after you win or lose.  Always look 3 layers down into why you won or lost. The first layer is usually the external reason, but it is only the tip of the iceberg and not the true reason you lost the deal. For example, when you ask a recent opportunity why they decide not to go forward with your solution, you may hear something like this:

  • Buyer External Reason: “We didn’t have the budget.” This is what the buyer says when you ask why they didn’t move forward.
  • Buyer Internal Reason: “I didn’t want to put my neck on the line.” The buyer didn’t fully believe in championing the solution.
  • Loss Reason: “There was a lack of a clear and believable ROI.” The buyer wasn’t able to see an ROI or value they could present to get buy-in from the necessary stakeholders.

After evaluating the current market landscape and your customers did you find a clear competitive advantage for a sizable part of the market? If so, fantastic go after it and make sure to highlight this clearly across all your sales, marketing and to improve your product or service offering. If it isn’t strong enough to disproportionately win, read on…

How to Build a Competitive Advantage

Here are several strategies you can use to build a competitive advantage if you didn’t find an existing one:

Create an Orthogonal Wedge Strategy – One strategy I’ve seen work is to create a smaller service offering that gives you a competitive advantage. For example, if you offer a software solution create an offering that uniquely positions you to win deals based on a problem before your customer needs what your software provides. Years ago, when I had a business that sold website development, we created a Content Strategy that mapped out our customers key business objectives so that it could be translated to a clear sitemap and blueprint of priorities when they designed a website. At the time no one else was doing this in the industry we served. And when we did this content strategy, we closed nearly 100% of the customers on the larger website CMS solution we offered.

Focus on One Problem – Be great at one problem for one customer. This is especially valuable if you have larger incumbent players in your space that have a whole platform solution. Laser focus and become the Best-of-Breed to punch a hole in the Market and take your lack of features and turn it into a strength.

Out-Niche the Competition – The alternative to a core problem is a cohort of customers that you carve out and build out your solutions to allow you to disproportionately win. Draw concentric circles and continue to add variables until you know you have or can have a competitive advantage over other players.

Conduct a Full Customer Discovery Process – Lastly, regardless of any the above strategies being implemented it is essential to have a a Customer Discovery process. The more time you spend with your customers, the more deeply you will be able to know how to build a competitive advantage. Do this discovery and then validate what you discover by surveying companies in your target market.


A Competitive Advantage means being able to go after business that you want and win. As you identify your competitive advantage, start with a laser focus and determine when you have the capacity to expand into new customer segments, expansion scope of your offering or remove concentric circles to broaden your niche. If you haven’t already, I’d suggest you read why it’s so important in my article on how competitive advantage drives profit, revenue and ultimately the value of your company.