The 3 P's of building a competitive advantage

In this 3-part series, we set out how a business can create and sustain a competitive advantage by focusing on 3 core elements.

All 3 elements interact with the other elements, creating both opportunities and limitations. For example, automating a process will free up the time previously take to complete a task. This would enable the employee affected to focus on higher value tasks.

Today's post will deal with the first element: People.

This element can further be broken down into the following subcategories:

1) Staff, and

2) Customers

Having the right staff

Employing and retaining the right staff is essential to achieving success as a business. However, this is not always easy. A business needs to ensure that staff members are:

• In the job that utilises their skills and capabilities the most. Having someone that is excellent in Skill Y but using them to perform task X is not the most efficient way of achieving the goals of the business. It also leads to the staff member feeling unfulfilled and demotivated, which could lead to them leaving;

• The right fit for the organisational culture of the business. Crafting and maintaining a positive and productive organisational culture is an invaluable tool for any business;

• Happy in their jobs. A happy employee is much more likely to work especially hard for customers. According to research, 9 out of 10 happy employees are "willing to work especially hard for my organization's customers". This drops dramatically to only 6 out of 10 for unhappy employees. 54% of unhappy employees plan to leave their employer over the next 12 months, versus only 23% for those who are happy. A higher staff turnover has many costs for a business, including training and costs of the recruitment process.

A business also needs to ensure it has the right number of staff. Having too few staff can lead to negative customer experiences. Conversely, having too many leads to greater costs and lower efficiency.

Having the right customers

A business needs to have profitable customers. While this is intuitive, many businesses don't know who their most profitable customers are. The Pareto Principle (the 80/20 Rule) states that 80 percent of results tend to come from only 20% of your efforts. When applied to businesses, it means that roughly 80% of business profits come from 20% of your sales.

A business can identify and focus its efforts on the customers that are most profitable, thereby increasing sales and making the most of limited resources.

Making sure your customer service is focused on positive experience for customers will differentiate your offering from competitors, and also lead to a more word of mouth referrals. According to Hubspot, 77% of customers who have a positive brand experience will tell someone else about it.

Summary

A business can differentiate itself by making sure it has the right number of staff, in the right roles, and focusing on the right customers.

Doing so will allow a business to streamline processes, create better value for customers, and increase its profitability and competitiveness in the long run.