“I try not to think about them,” Gene continued. “We have fifty trucks, they have six trucks in this market. Worse part, they are taking work for way less than us. Sometimes, I think they aren’t here to make money. I think they are here just to make us look like bad guys.”

“So, they are taking work at a lower price to the customer?” I asked.

“Yeah, sometimes, it’s lower than what it costs me. They are buying the work.”

“Let’s look at a couple of things, Gene. First, they don’t have an office over here?”

“No.”

“They don’t have an office over here, so they are using their dispatch people in their home office, using Google maps or something. They are billing people using either credit cards or invoicing from their home office, sending the invoice by fax, email or snail mail.

“They aren’t competing in the Yellow Pages, only on the internet, so their hard advertising costs are less. Gene, I don’t think they are working on a lower margin than you. I think they have figured out a lower cost structure. In fact, even with a lower price to the customer, they may be making more money than you.” -TF

“So, it’s important to be Number One or Number Two in our market. I get that. Third or Fourth place just creates a target. Can we use geography to narrow our market definition? I mean, as a local supplier, we have an advantage. We can honestly say that we are Number One in our local market,” Gene explained.

“Yes, if your market is truly a local market. But, Gene, I gotta tell you, I have seen some trucks rolling around town from a new competitor I haven’t seen before,” I replied.

“Yeah, I know who they are. Their headquarters are on the other side of the state. They don’t do any local advertising. I think they are depending on the internet to get their leads. They show up pretty heavy in search engines. But, still, they’re from out of town.”

“Gene, I visited their yard. They don’t have an office, but they have six trucks in your local market.” -TF

“Yes, we have a couple of competitors, big competitors, but they pretty much leave us alone. We’re much too small in the market to be more than a thorn in their side,” Gene explained.

“So, as the overall market contracts and the Top Competitors’ revenues get pinched, where do you think they will go, to hold on to market share,” I asked.

“Well, we always hope they will fight with each other,” Gene continued.

“Why would the Top Competitor in the market fight with Number Two when they can just come in and take out Number Four or Number Five?”

Gene sat up in his chair, suddenly uncomfortable. “Well, Number Four would be us. And they have always left us alone. After all, we just pick up the crumbs that fall off of their cake. Why would the Top Dog want to come after us?”

“Why would the Top Competitor want to spend a lot of money, energy and resources fighting with Number Two, when they can take your customers without a whimper?” I asked again.

I could see Gene’s eyes tracing this chess game in his mind. “Look, Gene,” I continued. “In any market, when times are good, it’s easy to be Number Four, living off the crumbs. But, when the market gets tight, the only place to be is Number One or Number Two. Number Three and Number Four will have their heads handed to them.” -TF

“You said this subject has implications outside of the marketing war room?” I continued the conversation with Jaynie Smith about her new book Creating Competitive Advantage.

“Often, when a company thinks about its competitive advantage, it gets stuck as an exercise for the marketing department. The most powerful part of this process occurs when competitive advantage gets driven into operations.

“Competitive advantage is not some double-speak marketing gimmick. For it to be effective, it has to be real, when its elements are designed into the product or service and become visible to the customer.

“I tell the story of Volvo. Its marketing talks about safety and its design includes whiplash protection, brake circuit redundancy, traction and spin control. Competitors cannot copy a slogan. They have to retool their product if they expect to win on the promise of safety.”

So, what is your competitive advantage? Not what your marketing says, but what is truly distinctive about your product or service? I would be interested to hear your thoughts. -TF

Jaynie Smith’s Creating Competitive Advantage is now available on Amazon.

I was talking with Jaynie Smith, a friend of mine about her new book. “There are all kinds of management books written by all kinds of people. Why is the subject of Competitive Advantage so important?”

“Just because you make a product, doesn’t mean you have a successful business. Just because you take out an ad or create a fancy brochure doesn’t mean you will win. Every company spends marketing dollars, but most of it underperforms. Most marketing doesn’t communicate what is truly important and gets caught up in the blather that sounds like every other company’s marketing stuff.

“And customers are smart. There is the saying that you can’t fool dogs or children. Well, you can’t fool customers either. Most marketing doesn’t connect or communicate anything real.”

“Give me an example?” I asked.

“At our company, quality is number one. We are in business to exceed our customer’s expectations. Please. It doesn’t mean anything.” Jaynie stopped. “But it is more important than that. This is not about fixing bad marketing. This is about competing head to head with worthy opponents who have the skills and resources to beat you, if you let them.

“I tell the story of JTECH, an on-site pager company in Boca Raton, Florida, who successfully brought to market local pagers, used by hundreds of restaurant and retail store chains across the country. It was such a great success that Motorola decided to get into the business. JTECH had to seriously answer two simple questions. Why should our customers do business with us? What do we offer that the other guy doesn’t?

“By making the right choices, JTECH fought off a devastating attack.”

If you are interested, you can read the rest of the story (pdf) and find out how they did it.

Jaynie Smith’s book Creating Competitive Advantage is available now from Barnes and Noble ($16), CEO Read ($16) and Amazon ($13). -TF

Struggle as they might, not a single person in the room was able to do it. The assignment sounded simple. Name your unique competitive advantage. Name one quality that truly distinguishes your company from your competitors. Name that one quality that gives your customer a reason to make you the clear choice above your rivals.

I met Jaynie Smith more than ten years ago. Over the years, I have watched her ask that question many times, so the response from this group was no surprise.

“It’s rare that a company doesn’t have a competitive advantage,” Jaynie explains, “but most often, the company simply doesn’t know what it is. Or they know what it is, but have never talked about it, held it up for display, pulled it apart to understand its power. Or they know what it is and even understand it, but never tell anyone, never tell their employees, never tell their customers.”

And so, I was happy to learn, a couple of years ago, that Jaynie was compiling her research into a book. And it’s published. Because she is a close friend, I get to spend time with her to pick her brain. Over the next couple of days, I will share some insights from those conversations.

Meanwhile, the book is out. Creating Competitive Advantage by Jaynie Smith. It lists for $20, but Amazon has it for $13. And if you can’t wait for the book, you can read chapter one on Jaynie’s website (for free).

A friend of mine named Dan Wertenberg threatened to follow me around one day to evaluate my effectiveness. It was interesting. He said, as I went through my day, only 20% of the things I did would have real lasting impact on my business, my organization, my effectiveness. And I got to thinking about that.

As I look back on the last three years, what were the four or five strategic decisions that I made that had a lasting impact on the direction of my business? It was the opening of a new office, a key hire, the creation of a new business direction. The rest was just noise, busy work to make me believe that I was doing important adult stuff.

What was more interesting was the next question. In the next three years, what will be the important decisions that I make that will have a lasting impact?

In the next three years, what will be the important decisions that you make that will have a lasting impact on your career, your team, your department, your organization? -TF