Competitive strengths or common ones: testing what actually earns a price

Open almost any business plan or capability statement and the list of strengths will look familiar: reliable, responsive, high quality, an experienced team. Each claim is usually true. The difficulty is that the competitor down the road makes the same four claims, their customers believe them too, and the buyer choosing between the two businesses cannot tell them apart on any of them.

This matters more than it seems, because a strength list does not stay in a document. It shapes the price the business tries to hold, where it invests, what it tells customers and which weaknesses it leaves alone. A strength that is classified wrongly leads to money spent in the wrong place, and the error tends to last, because nothing in normal reporting revisits it.

This article explains the difference between strengths that earn a price and strengths that only keep a business in the game, two simple tests for telling them apart, how to invest differently in each, how to sort weaknesses so that the costly ones get attention, four challenging questions that expose what a business would rather not see, and how to count the competitors that never appear in a list of rivals.

Doing the same things better, or doing different things

Michael Porter drew a useful distinction in the 1990s between operational effectiveness, performing similar activities better than rivals, and strategy, performing different activities or performing similar activities in different ways. Operational effectiveness is necessary, but its benefits tend not to last, because good practice spreads: through staff who move between businesses, through advisers and suppliers, and through customers who describe what the competitor does.

The two need opposite approaches to investment. Operational effectiveness should be funded to the level the market expects, then held there. Genuine advantage should be funded beyond the point where its return is obvious, because obvious returns invite copying. Many businesses do the reverse. They invest steadily in what everyone can see and measure, and only occasionally in what is difficult, unmeasured and genuinely theirs.

Why the strength list never gets shorter

Four habits keep strength lists long:

• The comparison is skipped. “Are we good at this?” is answered from the business’s own history. “Are we better than the alternative the customer is actually considering?” needs outside evidence, which most businesses do not collect.
• The room favours agreement. Strengths are usually listed by the people responsible for each area, so challenging a claim means challenging a colleague.
• Praise is confused with choice. Customers praise what they experienced after buying. The decision itself was often made on something never mentioned: availability on the right date, an existing relationship or a specification written around the incumbent.
• Personal strengths are counted as business strengths. A capability held by two or three people is valuable, but it is not yet a position the business holds. It leaves when they do.

Two tests that do most of the work

Two questions, both answered with evidence from outside the business, sort most claimed strengths:

1. Would a customer choose us, or pay more, specifically because of this?
2. Could a capable competitor match it within about a year if they decided to?

The third category is the most expensive. Businesses can invest for years in capabilities customers do not value, and read the lack of reward as a marketing problem.

Common strengths are insurance, not advantage

Reliability, responsiveness, meeting specifications, compliance and safety are essential. But they mostly protect against loss rather than create advantage. Failing at them can cost a business its customers or its right to bid. Excelling at them rarely wins extra margin, because customers assume them.

The investment rule follows: fund common strengths to the level the market expects, then stop. That level is set by customer expectations and by the best alternative available to them, not by internal ambition, and it rises as competitors improve. Spending beyond it looks like excellence, and shows up as steadily improving internal measures, but it rarely shows up in price.

Quality writer Philip Crosby defined quality as conformance to requirements and focused attention on the cost of failing to conform. Spending beyond conformance is not quality investment. It is discretionary spending that needs its own justification. For common strengths, the better aim is to hold the required standard at lower cost than competitors, for example by preventing defects at their source rather than finding them later.

A practical check: a genuine advantage should be visible in the prices the business actually achieves. If a capability keeps improving on internal measures while prices stay flat, it is probably common, or the business is failing to show customers its value. Those need different responses.

Strategy is what you fund

A business can approve a long list of priorities and still have no strategy. Strategy shows up in what gets money, people and the owner’s attention, not in what is written in the plan. If a goal is described as critical but consistently loses scarce people and money to less important work, the allocation is the real strategy.

Concentrating limited resources on a few things that genuinely matter creates learning, speed and distinctiveness that scattered effort cannot. That means making explicit choices about what not to do. A useful check is to write a short list of deliberate non-priorities: worthwhile things the business will not pursue this year because its strategy requires focus. A plan with no non-priorities has usually avoided choosing.

Sorting weaknesses: common, catastrophic and profit-eaters

The same discipline applies to weaknesses, where it is used even less. Three kinds deserve different treatment:

• Common weaknesses are shared across the industry: limited recognition in a new market, thin management depth in a growing business, slow customer payments. They need managing, rarely alarm.
• Catastrophic weaknesses could end the business or its ability to trade: a missing licence or accreditation needed to bid, a core market in genuine decline, a delivery flaw the business cannot fix. One that rarely appears on any list is an inability to learn, which makes every other weakness permanent.
• Profit-eaters are not fatal and rarely discussed, but they drain margin continuously: rework, scope changes that are never charged, small discounts given without approval, freight absorbed, work taken on that nobody chose, problems fixed for free.

Attention is often the wrong way round. Catastrophic weaknesses rightly get attention. Common weaknesses get comfortable improvement projects. Profit-eaters get almost none, because each instance is small and nobody adds them up.

The order of attention should be: catastrophic first, profit-eaters second and common weaknesses last, unless a common weakness blocks something the strategy depends on. Profit-eaters come second because the money is already being lost, and recovering it funds everything else.

Four uncomfortable questions

A short exercise often reveals more than a full day of planning. The owner and leadership answer four questions:

1. If you were our competitor, how would you attack this business?
2. If you were our customer, what would frustrate you?
3. If you were buying this business, what would you change in the first month?
4. What would a critical customer say about us that we wish were not true?

Each reaches different material. The first shows where the business is exposed, such as which profitable segment a rival could take cheaply. The second shows friction everyone has stopped noticing. The third is often the most productive, because it brings out changes the leadership already knows are needed and has put off. The fourth brings out the reputational fact everyone knows and avoids saying.

How the exercise is run matters:

• Write answers individually first, because the first answer spoken shapes everything said after it.
• Assign the attacker role to someone, and ask them to produce a plan with a cost.
• Do not let people defend their own area in the first round.
• Use customers’ own words where they exist, such as complaints, lost-quote feedback and service records.
• Bring in an outside voice, such as an adviser, a board member or a trusted customer, because a team reviewing itself tends to be kind.

The competitors you never counted

Most competitor lists include businesses in the same industry. Customers do not think that way. A more useful question is: if we did not exist, what would this customer do instead?

The answers are often not other firms. Customers might:

• do nothing and live with the problem, often the largest competitor of all;
• do it themselves;
• buy a partial substitute from a different kind of business and accept the shortfall;
• meet the need another way, which is why Clayton Christensen’s idea of the job a customer hires a product to do is useful;
• delay until a budget, a deadline or a failure forces the decision.

Ignoring these alternatives has real costs. Lost sales are recorded against named competitors when the customer actually decided not to proceed, so the business responds to rivals when the real barrier was a budget or a business case. Prices are compared against competitors while the cheapest option, doing nothing, is ignored. The Porter’s five forces article covers substitutes as a competitive force.

A simple fix is to add one question to every lost-quote follow-up: what else did you consider, including not going ahead?

Five tests for each claimed strength

Take each strength the business claims and test it:

Strengths that pass all five deserve sustained investment. Strengths that fail replicability should be funded to parity and capped. Strengths that fail willingness to pay should stop attracting investment, or start being charged for.

A worked example

This is an illustration. A metal fabrication business with 22 staff supplies balustrades, stairs and architectural steelwork to builders and architects. Its capability statement lists six strengths: reliable delivery, quality welding, responsiveness, an experienced team, in-house powder coating and 3D site scanning.

The owner tests each one, using quote records, customer conversations and what competitors advertise:

• Reliable delivery: about 94% on time, similar to two main competitors. Common. Hold it, but stop presenting it as a reason to choose the business.
• Quality welding: required certification is held by every serious competitor. Common, and an entry condition.
• Responsiveness: customers say all the good fabricators respond quickly. Common.
• Experienced team: much of the design and problem-solving knowledge sits with two senior fabricators near retirement. Fails durability.
• In-house powder coating: lets the business finish jobs about six days faster than competitors who send work out. Quote records show it wins urgent jobs at noticeably better margins. A competitor would need a large investment to match it. Competitive.
• 3D site scanning: customers value fewer measurement errors, but a competitor could buy similar equipment within a year. Common soon, and currently not visible to customers before they buy.

The owner then adds up the profit-eaters for the past year:

Finally, the owner reviews the last 20 lost quotes. Seven went to named competitors. Nine projects were deferred or did not proceed, and four builders used a standard product or did the work themselves. Thirteen of the twenty losses were not to rivals at all.

The decisions follow. Investment in delivery and welding systems is held at its current level. Powder coating capacity is expanded and its faster turnaround becomes the main message to builders. The senior fabricators spend part of each week documenting methods and training two younger staff. A written variation process is introduced so that site changes are charged. Deferred projects are followed up when their budgets are likely to be set. The capability statement shrinks from six strengths to two, with evidence for each.

How this applies to a small Australian business

Small businesses often describe themselves with the same strengths as their competitors. Practical steps:

• List your claimed strengths and test each against willingness to pay and replicability.
• Fund common strengths to parity, not beyond.
• Invest steadily in genuine advantages, and make them visible to customers.
• Write a short list of non-priorities.
• Add up your profit-eaters over a year.
• Run the four uncomfortable questions once a year, with an outside voice.
• Ask lost customers what else they considered, including doing nothing.
• Reduce dependence on a few people for strengths that matter.

The SWOT analysis that leads to action and what a discount request is telling you articles cover related tools.

Signals worth watching

• Strengths that competitors also claim.
• A capability improving on internal measures while prices stay flat.
• Discount requests concentrating on one offering.
• Lost-quote records with no category for “did not proceed”.
• Customers who renew but never buy more.
• Competitors quickly matching anything new you announce.
• Small, unrecorded costs that nobody adds up.

Common mistakes

• Listing strengths without comparing them with the customer’s real alternatives.
• Over-investing in common strengths.
• Treating a few people’s skills as a business position.
• Ignoring profit-eaters because each one is small.
• Counting only direct competitors.
• Approving priorities without choosing what not to do.

Frequently asked questions

Is it wrong to mention reliability and quality in marketing? No. Customers need to know you meet their expectations. Just do not rely on them to justify a higher price or to distinguish you from competitors.

What if we cannot find any competitive strength? That is valuable to know. It suggests competing mainly on cost and efficiency, or deliberately building a strength that customers would pay for. Either is a clearer strategy than claiming strengths you do not have.

How do we gather outside evidence? Lost-quote feedback, conversations with customers about why they chose you, comparisons of prices achieved, what competitors advertise and, where possible, a short structured interview with a few recent customers.

How often should we review our strengths? At least once a year, because competitors improve and today’s advantage can become tomorrow’s entry condition.

Who should run the four questions? The owner can, but the exercise works better with an outside voice who has no history to protect.

Questions to ask

• Which of our claimed strengths would survive the willingness-to-pay test with outside evidence?
• What are we funding as if it were an advantage when it should only be funded to parity?
• If a well-funded competitor targeted our most profitable customers, what would they attack first?
• What do our profit-eaters cost in a year, and who owns that number?
• In our last twenty lost quotes, how many went to competitors and how many to doing nothing?
• What have we decided not to do this year?

Bringing it together

A list of strengths is really a set of claims about where money should go and what price can be held. Test each strength against what customers pay for and what rivals could copy, fund common strengths only to the level the market expects, invest steadily in genuine advantages and make them visible, and choose explicitly what not to do. Sort weaknesses so that catastrophic risks and profit-eaters get attention first, ask the uncomfortable questions and count the competitors that are not firms. A business that can name one strength a capable rival would struggle to copy, with evidence, is in a stronger position than one that claims nine.

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Source: KEVOS notes, drawing on Michael Porter’s distinction between operational effectiveness and strategy, Philip Crosby’s definition of quality as conformance to requirements and Clayton Christensen’s jobs-to-be-done framing. Examples and figures in this article are illustrations.