QUOTATION 2

JACK WALSH ON THE NEED FOR A COMPETITIVE ADVANTAGE

Use this to determine whether your business is likely to be successful.

Jack Walsh (b. 1935) was the highly successful CEO of General Electric between 1981 and 2001. He gave the following advice to any entrepreneur or executive thinking of entering a new market or business.

If you don’t have a competitive advantage, don’t compete.

Jack Walsh

Managers are often poor at identifying the competitive strengths and weaknesses in their organisation. Generally, the myopia increases with seniority, but it’s present throughout the organisation. For example, in every SWOT analysis that I’ve ever been involved in, it has been claimed that one of the organisation’s great strengths is ‘a well-trained and committed workforce’. The statement may be true, but, unless your staff are better than those employed by all your competitors, it doesn’t give you a competitive advantage. At best it means you are competing on a level playing field.

Illustration

WHAT TO DO

  • Identify any existing competitive advantages that your organisation enjoys or could achieve if changes were made to current operations. Only in the smallest organisations will you be able to do this on your own. Therefore, pull together a small team of people from different levels and departments in the organisation.
  • Don’t pack the team with managers. Look for smart people who work with your customers and know what the competition is doing on the street.
  • Without divulging what new products or business you are thinking about acquiring, ask the team to identify the strengths that exist in the organisation. Get as many ideas out as you can. List them on Post-it Notes, arrange them under broad categories and stick them on the wall.
  • When the list is complete, introduce the new product or idea into the discussion and remove from the list those strengths that will have no effect on the new business or product. Ask the team to identify any strengths that apply specifically to the new product or business that have not been listed. What you now have is a list of items that you/your organisation do/does well.
  • But that does not mean that they provide you with a competitive advantage. You need to take each strength and test it against your strongest competitor in that area. For example, you identify the following possible competitive advantages: price, quality, brand recognition, excellent technology and customer service. Compare each strength against the current competitor who is leader in that field using benchmarking (see Quotation 82).
  • You don’t have to achieve a competitive advantage in each area; you just need an edge in one or two areas that you can exploit. For example, Apple enjoys a competitive advantage for its design and brand image that few organisations can touch.
  • Small companies can usually compete on speed, personal attention and cost.
  • If you have a totally new product, the question is: can you make it at a price the customer is willing to pay?

QUESTIONS TO ASK

  • How much effort are you willing to put into establishing the new product or business?
  • How resilient is each of the competitive advantages identified? Will competitors be able to quickly overcome them?
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