Few companies can lay claim to that holy grail market position for any length of time. Here are some that come immediately to mind: Ferrari, Rolls Royce Engines, Hoover, Apple’s Iphone and Ipod, Boeing, Walkman, Sky, Microsoft Windows, are all good examples of companies who have achieved, or are holding it today. Sustainable competitive advantage is the ability to create and sustain a position within a market. Sustaining a desirable market position provides long-term competitive posiitoning for that brand.
The competitive advantage most companies strategically aim for is to own the space of early adopter within an adoption curve. That position, where brands are seen as premium players, producing innovative new products and services and able to command and earn premium prices for those products. That premium position, finding, and holding the early adopter position in any market is seen as the optimum competitive advantage position within any market.
By finding that competitive position, and often helping creating the market structure, a brand takes ownership of that the competitive position and often drives the development and evolution of the market. A company can choose to operate anywhere within a market and make it competitive if they build their business model to a defined market position.
Making it Sustainable
Making a competitive position sustainable requires a brand to develop its ability to sustain its position over the long term. That sounds easy in theory, but in reality is hard. Short-term attitudes in growth and profit can easily distract a leadership teams focus. Failing to invest in sustaining their brand’s market position, or stakeholder demands for profit taking are two of the most common pulls that destabilise a brands’ established market position.
The challenge for any leadership team with their business is to be able to see the market position they want and then to take hold and hold onto that market position. Sustainable competitive advantage, the holy grail of a successful business is not easy to find, straight forward to own or simple to sustain, and that’s why it is every leaders’ holy grail.
How to Outcompete the Competition
In mature (and often saturated) markets developing a unique strategic position can give a business sustainable competitive advantage. A sustainable competitive advantage in any market is the holy grail for business owners. To be somewhere that your competitors aren’t, and to have something that cannot be taken away, is what every business leader wants to achieve in setting up in business, and dreams of achieving. It is one clear defining way of out competing the competition is to develop a sustainable competitive advantage in a market.
Dyson Vacuum Cleaners
To be recognised as the market maker, such as Hoover, whose name is synonymous with vacuum cleaners, gave the Hoover brand unbelievable control of the market for most of the 20th century. Hoover, the brand leader owned the global market, with an unparalleled history, and complete market dominance. The brand name itself became synonymous with the product category, everyone hoovered their house with a Hoover.
So what changed? A loss of focus and desire to continue to own the market coupled with the airplane ticket fiasco which opened the door to new competitors and to one man in particular James Dyson who grabbed the opportunity to replace Hoovers’ once held position in the market launching his own Dyson brand through technology shift of his cyclone bag less vacuum.
His passion, created from vacuuming at home and becoming frustrated, seeing the cyclone idea at a sawmill which then took 15 years, 5,127 prototypes to turn into a winning product. Today this winning product benefits upon 60% recommendation purchases and has allowed Dyson to spin his cyclone technology into hair and air dryers as well as washing machines.
Features of Strategic Competitive Advantage
What are the key features of sustainable competitive advantage for any company in their market, well here are the most commonly found top five:-
Charge a premium for its services; even low cost suppliers out price other low cost suppliers.
Lead the market through innovation; will get to market new ideas quicker or in a more dominant way to shift the market to your agenda.
Controls the key channels to market; from buying decision processes to pricing structures.
Owns the pace of change within the market; from technology development and consumer mind set, being the pace setter in the market.
Control of buyer activity; the significant majority of the Share Of Buy (SOB) and Share Of Space (SOS) decsions through its dominance.
Sustainable competitive advantage is an extremely difficult goal. Most successful brands only ever achieve the challenger market position, one that challenges existing perceptions within a market. Developing a sustainable competitive advantage requires an organisation to constantly challenge not only the competition but also itself, to sustain its desirable position within its market.
Creating dominant sustainability requires the leadership to create a clear vision of where the company is going and where the market opportunity exists. It takes leadership with passion, dedication and drive for a brand to succeed in moving from a challenger brand to one which can dominate and sustain that domination of its market such as Dyson. For men like James Dyson the advantage was that he was in the right place at the right time, with the right product. That has enabled a technological shift in the market with his bag less vacuum and a move to smaller cable-less products dominate the innovator position within the market.
Learn More about Strategy
If you want to develop your company’s position then there needs to be a vision for it. Where it is going and why. If your look for some advice on developing your company, its marketing, its sustainable competitive advantage then contact us at Cowden Consulting to see how we can assist you, or read more about us in this blog or at Cowden Consulting.
One of the most important pieces of any good business plan is to define what you do and where you are going as a business. If you do not define what you do and where you are going then why should people work with you or for you? Defining your purpose as a business is the clearest statement of intent any director or owner of a business can make, and yet one of the most misunderstood and avoided pieces of any business plan. This is the mission statement which everyone in a company should be able to relate to and believe in.
Why is it avoided? In my experience directors are most often frightened of making a commitment of what they stand for so as not to alienate any existing or potential customers who may not fit the proposed mission statement. This contradiction, not wanting to say what the primary goal of a business or organization is, means that many companies try to be everything to everyone, ending up being meaningless to everyone.
This failure to define a mission is also one of the biggest limitations companies and organizations have in creating clear blue water between them and other players in their market. It is why so many companies struggle to stand out and then expect someone in marketing to try to answer that question sometime later. It is not up to marketing to define the purpose of any business or organization, they must influence it but it takes leadership from the top for a mission statement to be successful. It may also be why so many companies have to spend so much on marketing to define them.
A good mission statement is clear, unambiguous, engaging and relevant to all its key audiences: namely its leadership, senior management, employees, shareholders and customers. A mission and a vision (but more of that later) provides a central definition of what a business or organization delivers.
Creating a Successful Mission Statement
Here’s a quick-step guide to creating a mission statement.
First identify your organization’s “strategic advantage” what makes you successful. This is the idea or approach that makes your organization stand out from its competitors; the reason that customers prefer you and not your competitors, what makes you unique, what are your core competencies?
Secondly, identify the key measures of your success. Key success measures by which you can measure, Key Performance Indicators (KPI’s), typically pick 3 to 5 headline measures of performance.
Thirdly combine your strategic advantage and success measures (KPI’s) into tangible and measurable goal.
Define the wording, using clear language, until you have a concise and precise statement of your mission, which expresses your ideas, measures, and desired result.
Now communicate it effectively so everyone owns the mission statement within the company, make it public and ensure it is owned from the top with passion.
Communicating mission statements effectively to everyone is a defining piece of making the mission live. After all the hard work in having one so often they are filed away, or framed and stuck on the wall and forgotten. Instead successful Mission statements are launched to everyone and owned.
I’ve run embedding program within companies to ensure that everyone inside businesses and organizations “own” the Mission and build it into their everyday activity.
If you don’t follow through then all the effort is wasted and the opportunity is lost, so remember to focus on making your mission statement memorable and relevant. The leadership also needs to own the mission statement and make it live throughout the company.
A Mission Creates Loyalty
If you do this businesses and companies can achieve significant improvements which can include: building higher loyalty from staff, higher levels of customer service; improved stakeholder and channel support and lower costs for winning new higher value customers. These are just some examples of the benefits from having and using a mission statement successfully at the front end, one other major advantage is that you have a foundation upon which to build your business plan.
Business planning often gets a bad press. Yet those who do sit down and plan their business are so much more focused, confident, and successful than those who float along with the economic tide. Successful leaders plan their business, so they can focus on leading their team to deliver that plan.
Over the past ten years as a strategic planner we’ve worked with hundreds of business owners and seen how those that create a plan and implement it. Those that plan their business do so much better than those owners who try aimlessly lead their business on a wing, a prayer or a dream. Successful leader’s plan their business, so that everyone knows where they are going what their role is in achieving that success.
According the latest BERR report, Small and Medium-sized Enterprises (SME’s) together accounted for 99.9 per cent of all enterprises, 59.8 per cent of private sector employment and 49.0 per cent of private sector turnover. SME’s really do matter to the British economy, and yet they receive little effective support from Government agencies despite being the backbone of the economy, employment, and innovation.
Why Business Leader’s Don’t Plan
“If you don’t make things happen, things will happen to you”Lanes Company
Having questioned business owners over the last decade the reasons why owners have not put a plan in place and then executed it, the excuses range from not having the skills, make the time, or have the conviction of their thoughts. Owners know they should have a plan ‘we had one when we first started, but have not looked at it since’ is a common theme. The other is being too busy fire fighting to realise that preventing fires starting, is the best way to not have to fight them.
Do business owners not see the value in developing a plan for their business? On the other hand, is the classic perception for business owners that frenetically staying alive is seen as being successful? For many not knowing how to plan is one major reason why people haven’t and don’t plan their business. Where to start, and how to know what they are trying to achieve immediately puts people of planning.
Faults in Business Planning
Business planning is also often at fault here. The most common reason new start up businesses create a business plan is to secure funding from banks, that’s when banks did fund business start-ups (now they just offer a high interest mortgage backed by the Government). Therefore, once people have received funding they no longer see the main advantages of planning (and the real advantages are not around money).
Business Planning Skills – Have some GOALS
“The discipline of writing something down is the first step toward making it happen.” – Lee Iacocca
Planning takes time, resources, (grey stuff) not the executive trip to some exotic away weekend planning, but some time allocated to review where you are as a business, how your sector and industry are performing and what you want to achieve in the future. Whether it is looking at the next year or planning the next five years, everyone who owns or directs a business is responsible for setting its direction. However, just having a plan in your head, with the classic defence of ‘its flexible at the moment’ is either ducking the responsibility or deluding themselves.
The only way to have a plan rather than a dream is to have it written down, turned (if it is not already) into an action plan which is resourced and owned by someone to deliver. Only then do businesses go forward in a deliberate purposeful way. Only then do the right things happen because you made them happen and only then can everyone, employees, shareholders, customers, channel partners and even other halves, see your dream, share your dream, deliver your dream. That’s when planning works. It is a written document, which lives within your company, and it doesn’t matter if you are a one-man (woman) band or running a multi-national Plc.
What Business Planning Delivers
“In the absence of clearly-defined goals, we become strangely loyal to performing daily trivia until ultimately we become enslaved by it.” – Robert Heinlein
Planning provides focus in strategic direction. It provides clarity of where the business is and where it is going as well as a vehicle for getting from where you are to where you want to be. Planning time out of the business provides time to reflect on personal and corporate goals, time to share and channel new ideas while reviewing existing activities.
Planning in a structured and open format develops clarity of purpose and a clear understanding of the organisational and individual skills people have and can use to leverage advantage. Bringing in outside views widens the planning horizon, a fresh perspective to drive businesses forward. This is why many successful businesses use non-executive directors or outside specialists to help drive their business forward. That is one reason why so many people volunteer to get support from people like the Dragons from Dragon’s Den, they are looking for expertise and advice which gives them confidence to go forward as much as the money.
Plan More For Success
British business owners need to plan more often to keep being successful. Good planning creates and sees opportunities as owners and directors lift their heads up from the daily grindstone. How often should you plan? Well it all depends on the speed of your market’s evolution, but even stable and stagnant businesses should review their business every year, and not just a light dusting (add ten percent and change the year) but strategically review what and how well they are doing.
It is only by looking for fresh opportunities and how to take best advantage of them, by planning your business around those opportunities, that companies successfully compete in today’s business environment.
Business Planning is not a four letter word
“An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage”Jack Welch
The old adage, compete or get beat, is more relevant today than it has ever been. The rise of the Internet means there are no secrets, competitive advantage lies with those who can see an opportunity and adapt fastest to take advantage of it. Those owners and directors who see and go for opportunities become the stronger ones. That is where good strategic business planning provides it real advantage. That’s why successful leaders plan their business to achieve that success.
By orientating a company to where it can retain better, win new and develop existing customers companies that plan their success out compete in their sector, and equally importantly have everyone focused on where they are going. From the smallest to the biggest every business needs to have a plan that is written down, owned and guiding your business in the direction you want it to go.
Business planning is often talked about as a challenging process to go through either to start a new business or as the essential process of taking ownership of an existing business. Many business plans fail to achieve their objective, not because they represent a bad idea but because they fall into classic business planning pitfalls or fall over blinding obvious credibility cliffs.
The business-planning process is in itself a very worthwhile pursuit, they take a lot of effort and resource. A business plan’s primary purpose is to convey an idea with a view to achieving a specific goal, most typically in securing funding.
Always remember that a business plan needs to be tailored to its target audience, if you have different audiences you will need to be able to flex your plan to that audiences specific needs. That means shaping it, edit it and amending it to achieve your objective.
If you would like to know how to avoid these top ten pitfalls and credibility cliff edges then click on the subject titles which are links at any time to see my step-by-step videos on how to avoid these pitfalls and credibility cliff edges.
Here’s the top twelve business planning mistakes I come across most frequently:-
Every business plan needs to describe the opportunity in detail. It must also detail how that opportunity can, and will by this plan, be exploited profitably, effectively and successfully. A good business plan can visualise the opportunity and articulate the company’s ability to reach a viable opportunity, this is a credibility cliff.
Tomorrow is a difficult place to plan for, but being able to identify and make that opportunity viable is the most critical test any business plan has. It is also the most common reason they fail. Your executive summary and the wider plan describes the viability of the opportunity in terms such as:-
What is the problem which people will pay to have solved?
Does your solution solve this issue for a specific target market?
Why would someone buy your solution over someone else’s?
Why are the benefits of your offering so compelling?
Can you reach that target market with a compelling message quickly and directly?
Where any assessment of a business starts and often finishes is at the numbers, specifically on the projected Income Statement or Profit & Loss. Projections are just that, but they are vital and must be based upon clearly stated assumptions. Many business plans are written with numbers which just do not stand up even to a first glance.
Dream numbers: in overestimating income and understating costs.
Your numbers have to make sense and be realistic, if you are a new start-up then they must grow rationally from nothing, but costs will be incurred before turnover is generated, these need to be realised and recognised in your financials.
The financials must also make sense and be presented in a format which presents a clear case for the investment and the return you will deliver. Ultimately, they need to be credible, defensible and consistent.
All opportunities are only prospective ones without evidence that the target market can be accessed profitably, this is a big cliff to fall over.
Entrepreneurs are inherently product focused, concentrating their energies on ‘the winning idea’ to the exclusion of many other important elements such as how they intend to access their customer base, a classic cliff edge for any plan.
“Built and they will come” is a great dream but a poor plan.
A business plan must include a comprehensive, credible and costed analysis of how the company is going to access their target market in a cost effective manner. Too many plans focus on the product not the market opportunity, they focus on teh solution not the problem they are solving.
For that to happen your plan needs to really understand the target customers, their needs, and purchasing priorities. Turning historical data into information and drawing knowledge from it ascertain insight into their future purchasing habits. Only then can you demonstrate cost effective routes to market within a business plan.
4. Executive Summaries Which Aren’t
Somewhere between a pitfall and a cliff edge, is the failure of the Executive Summary, to be either a summary or aimed at executives. The only part of any plan that will certainly be read is the Executive Summary and yet they rarely provide an effective summary of the business plan. A good plan highlights the key proposition of the plan and sells the proposal.Too many Executive Summaries either throw everything down in a jumbled mess, making them pages long and randomly pulling facts together, or they are so bland they say nothing!What’s a good Executive Summary, one that states the proposition clearly and succinctly, a page is sufficient for any plan. The Executive Summary should clearly explain the whole picture including what investment is required and what it will deliver. The point of an Executive Summary is to inform the executives, so many it punchy, outcome focused and only ever write it at the end.
Another associated key element of the plan which relates to this element is the estimations of projected turnover.
While every business plan talks in positive terms (hopefully), the obvious and persistent danger is that the innate optimism of all entrepreneurs and their tendency to exaggerate every business opportunity. If you have no established routes to market then you need to identify the start-up period within your turnover and cost model. This has major implications for cashflow and on where investment will be needed, which all experienced investors will expect that you have taken into account.
This pitfall is most easily managed using a realistic method for estimating income is to calculate the number of customers the business intends to capture and the average revenues. These two averaged inputs are easier to calculate and also to justify within a business plan.
I could have put this pitfall at number one very easily. What is the main purpose of the plan?
If the plan’s objective is to seek funding then it is vitally important to clearly describe the investment opportunity. While the plan describes the concept in detail, it must also address the primary purpose of the plan. So many plans fail to make it explicitly clear what the company’s needs to be successful or what the investment will mean to the company.
A good business plan answers the following key business planning questions:
Why investors should investing in this business rather than anywhere else?
When will they recoup their initial investment and how and when it can be realised?
What is their expected return on investment?
How the company has managed all aspects of risk?
Is the investment merely cash or do they need to bring other assets such as expertise to the table?
If you can answer these key questions, the intended audience will feel comfortable and be able to recognise that they fit the brief.
7. Non-Existent Cashflow Management
Particularly relevant to a new business, this is often an invisible cliff edge which business plans fall over on, is the ability of the business to articulate the differences between cash and profit. Running out of cash is the highest risk any new business or re-engineered business faces.
Good, positive, and conservative cash flow management is vital when businesses pursue investment opportunities where there are significant cash flows out, in advance of the cash flows coming in. This is the classic business plan cliff, which sends potential investors running.
If a business plan’s financial model is based upon selling on credit, then they receive the cash in the future, but need cask to pay expenses before that income hits their account, then they have a cashflow risk. This outflow of cash is the single biggest reason companies fail, its not margin, its rarely the product, it is invariably that they run out of cash.
8. Non existent Management Teams
Throwing a few CV’s into a business plan does not create a delivery team. Likewise a generic organisational chart with missing pieces and TBC (To Be Confirmed) is not going to inspire confidence with investors to part with their cash.
Entrepreneurs can often sell an idea but they do not always inspire they can select a balanced team of people with the right skill mix, from the financial management to key leadership roles and the right operational team to deliver your ambitious plan.
Having a structured management team with operational structures is essential for success. Track records matter, as much as having clear roles and responsibilities laid out in delivering the operational plan which underpins the business plan.
9. Poor Evidence of Demand
A significant area of concern when planning is justifying the sales forecast or demand levels for a product or service. This breaks down into the two main elements used in forecasting: the use of historical facts and the dependency of subjective assessment.
Sales forecasting, is the vital tool to identify the basis of all projected revenue figures that can be considered credible in the wider context of the plan. Unless there is verifiable demand for the idea, the risks grow out of all proportion, particularly if the initial start-up or investment costs are high.
Minimising risk in a business plan is all about gaining an understanding the potential demand and how the company will with this plan create or drive that demand rather than concentrate on ‘the product or the idea’. This classic cliff edge is a silent killer for investors, they don’t believe in it.
An effective business plan needs to be consistent throughout as all the various strands are brought together into one single entity, the plan. It is pitfall which entrepreneurs gloss over, but investors relentlessly prod before committing to any plan.
If there are multiple authors of the plan the risks of inconsistencies will exponentially increase. Extrapolating data can also cause problems, using research data and then jumping from possible market size to sales potential and then sales forecast are classic pitfalls which need to be thought through.
Presenters of the plan must have a simple narrative that runs through their plan, using key facts and staying ‘on script’ so as to ensure that a cohesive story is communicated. The numbers must also be consistent with the broader content so that there are no contradictions between them.
There is always competition. Yet the number of times the phrase“there are no competitors” appears in plans is considerable.
It does not matter how unique the proposition is there will also be some other business competing for people’s money. While there may not be a direct competitor it will certainly be a transfer investment that customers will be making. The business plan must recognise where the customers invest is coming from. If competitors are not identified in a business plan then the only credible assessment is that the company has not been diligent enough in its research.
Also remember that no company lives in a vacuum, as soon as you launch (or before) the marketplace will change. What will the competitive landscape look like in a few days, weeks, months or years? Can you create or establish significant barriers to entry, or is it likely that a successful market entry will be followed by better-placed competitors with greater resources, etc
You never get a second chance to make a great first impression.Your plan needs to be right the first time and the content needs to be accurate, clear, concise and correct.
More often than not business plans need to be completed by a certain date and hence the final stages can be rushed, a classic pitfall.
Consequently, in many instances the final output does not do justice to the plan. Attention to detail at the end is vital, so ensure you have a completed plan with references and formatted correctly. Also ensure the content of the plan has been edited down to a digestible size, use appendices for details.
Get someone removed from the process to proof the plan. If a presentation is part of the process, it should reflect the Executive Summary.
In Summary The Top 12 Business Planning Mistakes are caused by:-
Business plans by definition have a purpose of communicating a course of action so make sure they do that primary role. Support inevitably means resources with the primary aim of the plan often being to secure financial investment. Explain the invest what it will be used for and how it will be protected from these classic pitfalls and cliff edges.
Writing a successful business plan is all about preparation, about being as thorough in your research and planning as is possible. By avoiding the cliff edges and pitfalls above, the chances of the plan objectives being met increase substantially.