The Competitive Advantages of Your “Secret Sauce”

Success in business is a lot like sports when it comes to competitive advantages

Success in business is a lot like sports when it comes to competitive advantages

Competitive advantages are the things that allow a company or organization to outperform its competitors in the marketplace of products, services and even ideas. These advantages can take on many forms from brick and mortar facilities to more intangible things like an organization’s reputation and customer base.

Your competitive advantage may touch all aspects of your art business from creating your art to billing the customer. There are a lot of things that go into competitive advantage and it is well worth the time to determine the competitive advantages for your art business. Think of your competitive advantages as your “secret sauce”.

Competitive advantages are not permanent. The business and competitive environment is always changing and it appears that the speed with which things change is becoming more rapid. With the internet and an age of instant information it doesn’t take too long for competitors to see what each other are up to and change their game accordingly.

Just as your competitors have competitive advantages and disadvantages your art business has them as well. A good place to start to identify your competitive advantages is to look at your internal strengths – what you are best at and why? Knowing your competitive advantages will help you develop goals and strategies for your art business and also help build a brand that is profitable, sustainable and growing. These advantages should also be a foundation for your marketing messages in advertising, public relations, the internet and social media.

A little history

The idea of competitive advantage has been written about for ages starting with affairs of state, politics and the military. Soon businesses took up these ideas and applied them to the world of commerce. One theory of competitive advantage was developed by Michael Porter of the Harvard Business School in his 1980 book, Competitive Strategy. He came up with Five Forces as a way to look at competitive advantage when developing one’s own business strategies.

Porter’s Five Forces

Rivalry – With the rise of the internet and the global economy you don’t have far to look to find competition. In some industries the rivalry among competitors may be low and in others it may be extremely high – this applies to businesses in the arts as well! Porter came up with these strategies on how to deal with competitive rivalry:

  • Changing prices to gain an advantage either by lowering price to thwart competitors or raising prices which increases your profit thus giving you a financial competitive advantage.
  • Innovating and improving your art and the way it is made
  • Looking for new ways and places to sell your art
  • Looking for new sources of supply for the ingredients that go into your art either to get a better price or more dependable source of supply.

Threat of new entrants – Most businesses today are faced with the threat of new entrants in their markets. In some industries the barriers to entry by new competitors may be substantial in terms of costs, technologies, expertise, regulations and existing patents – i.e. building a new steel plant. For most art businesses the barriers to entry are low and entrants freely come and go. Some art businesses like Dale Chihuly’s glass sculpture business are an exception as they require substantial capital, facilities and expertise which not many potential competitors are capable of. There is not a lot you can do to ward off new competitors; you will just have to outdo them!

Threat of substitutes – The products produced by many industries may be substituted by other products often by other industries. For example if you are a craft brewer you may package your beer in glass bottles or in aluminum cans, choosing whichever makes the most economic sense. This is good news for the brewer but maybe not such good news for those supplying the containers. As an artist your art may be substituted by other similar/dissimilar art or by art in a different medium such as decorating with a sculpture instead of a painting.

Buyer Power – Depending on market trends, buyer power may affect a company’s competitive advantages. Buyers such as an art gallery may have a strong influence on setting prices (and the resulting artist’s profit) for an artist’s works and thus are said to have strong buying power. If you sell your art direct to the end user or consumer then in most instances the buyer is said to have little influence on price – ok, maybe a little bargaining!

Supplier Power – Creating art requires raw materials, supplies, labor and other inputs that all come at a price. If you have good access to the necessary ingredients to produce your art at a favorable price and your competition doesn’t, then you are said to have a competitive advantage with regards to supply.

Competitive advantage today

In the 30+ years since Michael Porter wrote his book Competitive Advantage the world has changed and so has the way we look at competitive advantage. Today, competitive advantage is seen to be more in the realm of innovation, creativity, speed, strong brands, solving customer problems, customer experiences and loyalty than in the ideas formulated by Porter.

Today we live in a global creative economy where successful companies are more focused on the customer than the competition. In her book The End of Competitive Advantage: How to Keep Your Strategy Moving as Fast as Your Business, author and professor, Rita McGrath summed it up rather nicely,

“There are indeed examples of advantages that can be sustained, even today. Capitalizing on deep customer relationships, making highly complicated machines such as airplanes, running a mine, and selling daily necessities such as food are all situations in which some companies have been able to exploit an advantage for some time. But in more and more sectors, and for more and more businesses, this is not what the world looks like any more. Music, high technology, travel, communication, consumer electronics, the automobile business, and even education are facing situations in which advantages are copied quickly, technology changes, or customers seek other alternatives and things move on.“

Sounds a lot like the art business, doesn’t it?

And it is not just professors who are talking about what competitive advantage means today. Jeff Bezos, CEO and founder shares his thoughts on the competition and being focused on their customers.

“We watch our competitors, learn from them, see the things that they were doing for customers and copy those things as much as we can.”

“We’re not competitor obsessed, we’re customer obsessed. We start with what the customer needs and we work backwards.”

Ok, now you should get the general idea of what competitive advantage is and why it is important to the growth and sustainability of your art business. The next step is to take a look at your art business and identify your competitive advantages. While you are looking around don’t forget to make a note of the things in your art business that are not now currently an advantage and how you might turn them into advantages.

The bottom line(s)…

There is a lot of competition in the art world, and to stand out and prosper the art business owner needs to capitalize on their competitive advantages. Competitive advantages are fleeting and competitors will soon attempt to copy what others are doing – it is a never ending cycle! Take an inventory of your competitive advantages and use this information to craft your business strategies and don’t forget to tell the world about them in your marketing efforts!

By Neil McKenzie

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