What is competitive advantage?

My Introduction to Management boys (uhm, young men, sorry) are working on their interview assignment as we speak... deadline is November 14! This semester we decided, as a class, to look into the theory of competitive advantage and how it is interpreted and applied by managers here in the UAE.

The three questions all 29 students will ask are the following:

  1. Please define quality for your organisation
  2. What is the basis of your competitive advantage?
  3. What do you do to maintain your competitive advantage?
Using the data (answers) from the interviews the students (hopefully) will analyse the responses from their interviewees and compare it with the management theory we have seen in class.
So what exactly is the theory on competitive advantage that I teach? You might be thinking competitive advantage is simply being better than your competition - so you can sell more stuff, sell it for a higher price or be so awesome that people put themselves on waiting lists or travel 100s of km to buy your product or service.
Well, there is that - but nerdy researchers (like me in case you are new to this blog) look for patterns (patterns make us giddy) that explain the why of things. We always need to know why (yes, kind of like a three year old that is never satisfied with an answer...).
So, after looking at these patterns the simplest theory (I prefer simple and I prefer to teach the simplest theories... usually they explain the most) is that there are four ways to build competitive advantage in your organisation:
  • Quality
  • Responsiveness to customers
  • Efficiency
  • Innovation
Now quality means different things to different people. I have a 75 dhs phone (about 20$ I guess) that I bought three years ago and it even came with 75 dhs free credit. It is read and I like it - the quality is just fine with me. Would the quality of this phone be fine with my students? Uhm, not exactly (even my housekeeper has a better phone than me...).
Quality, as every successful business person knows, is in the eye of the beholder. Target your customer right - give them consistent, reliable quality and they will keep coming back for more.
The second way to build competitive advantage is through efficiency. So what is efficiency exactly? A lot of people get this word mixed up with effective, and while the two should go hand in hand - effective means getting the job done right and efficient means getting the job done right while using less resources (contrary to the belief of many managers I encounter on a daily basis).
So efficiency is using less resources (time, money, people, material, energy, etc.) to get the product made, the service given or any "value" delivered to the customer. But - we cannot sacrifice saving time or money with actually getting the job done to the quality demanded by our customer or to the specifications required by law (sorry, mini-rant).
When we think of efficiency, we think of the Japanese of course - Toyota and the Just-In-Time supply chain. Here I think of the Lebanese restaurants who are able to deliver and produce copious amounts of food in a very short amount of time.
Responsiveness to customers is the third "way" to build competitive advantage. What this means is giving your customer what they want, when they want it, or maybe even before they know they want it. For example, the produce and store manager of your favorite grocery store (Waitrose on Reem Island in Abu Dhabi) figuring out how to make up a fruit basket for you to bring to your friend's house for Eid - when they don't do fruit baskets really (I heart Waitrose).
I ask my students why they choose to get their kandoras made at the specific tailor they use - they tell me my Dad has always gone there, they know my measurements and my style and what I like (yes, in a class of 29 boys, there will be exactly 29 different kandoras).
The last way to build competitive advantage - the most important way maybe, is innovation. During my PhD I spent months working on the definitions of innovation and value - so I get excited about this topic... When I ask my students to define innovation I get a lot of superlatives - the first (Metro in the Gulf), the tallest (building in the world, the Burj Khalifa), the best and the fanciest hotels in the world (Burj al Arab and the Emirates Palace). And they are right - but innovation is more than that.
When I first came to the UAE I asked my female students what was the best innovation for them in Abu Dhabi - in the past few years. I got the most awesome answer ever - "Dr. Connie, the best innovation in a long time is that KFC delivers". And she was right - I don't know which fast food chain started delivering in Abu Dhabi first - but I am sure when they told head office that they wanted to hire a delivery guy the people sitting in a Western office someplace said "huh? We don't deliver - people come to us - we are fast food!". But gas and labour is inexpensive and traffic and parking is horrible here - so fast food restaurants deliver. And fast food delivery is an innovation.
Wow - this turned out a bit longer than I had planned - and I didn't even give all the examples I like to give in class... Of course when the students hand in their brilliant reports I will be writing about the results... cause I am a nerd and that is what nerds do for fun!
Eid Mubarak everyone!

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