What is a competitive advantage and how do you build one?

by Michael W. Van Belle, Senior Vice President and Chief Financial Officer of The High Companies

A competitive advantage is the result of distinct competencies that allows an organization to be successful. These competencies allow the company to better serve the end customer and thus make the company the preferred choice of the market. In order for these competencies to be sustainable, they must be unique (not possessed my many), not obvious, and difficult to reproduce. Competitive advantages are based on a combination of resources (such as patents, proprietary knowledge, reputation, etc.) and capabilities (the internal processes and informal ways-of-working)-- provided these resources and capabilities allow a company to better serve the customer.

To build a competitive advantage, you must first fully understand your marketplace and customer requirements. No matter how well your internal processes perform or how many patents you hold, if the end result is not something desired by the customer you will not have a competitive advantage. The following article is a great example of understand what is important to the customer and using it to make a competitive advantage: "Great Service: The Ultimate Competitive Advantage."

Second, a company must fully understand its own abilities and opportunities to combine their efforts and effects in a way that is not a common practice. Lastly, there must be a way to protect the competencies developed. Often this is done through building relationships, patents, and trade secrets. A review of competitive advantage as defined by Michael Porter is available at this site.

Quote of the week

“When companies do make talent a priority, they often fall into another trap: focusing narrowly on HR systems and processes, which divert attention from the place where most of the obstacles lie: people’s heads. ‘Habits of mind are the real barriers to talent management,’ one financial-services executive confided.”

--Matthew Guthridge, Asmus B. Komm, and Emily Lawson, "Making Talent a Strategic Priority," The McKinsey Quarterly 2008, Number 1

Continuous improvement – How does it work as a strategy?

by Michael W. Van Belle, Senior Vice President and Chief Financial Officer of The High Companies 

Continuous improvement (CI) is not a strategy within itself, but a means to improve results regardless of strategy. The improvement can be in products, services, or processes and various methods in CI exist depending on the results needed. The magnitude of improvement gained also varies greatly…for example, Policy Deployment focuses on ‘breakthrough’ improvements over a single or multiple years while the MDI (Managing for Daily Improvement) process will focus on ‘incremental’ improvements on fundamental processes on a daily basis.

At High Industries, we focus our CI activities on business strategies using Policy Deployment. Policy Deployment lets us align our capital and human resources with the larger scale projects and activities needed to achieve our goals. We use MDI to help functions and CI measure their results on a near real-time basis, understand opportunities for improvement, and determine the impact of improvement activities.

Strategy: Driving Organizational Change

by Nevin D. Cooley, President and Chief Executive Officer, High Real Estate Group, LLC

Based on the volume of unsuccessful attempts at organizational change, many leaders conclude such change is not possible without significant carnage. Nevertheless, given all the external forces driving organizations to be responsive and flexible, a process for constructive organizational change must be found. In his book “Leading Change,” John P. Kotter notes eight common errors in organizational change efforts. They are:

1. Allowing too much complacency

2. Failing to create a sufficiently powerful guiding coalition

3. Underestimating the power of vision

4. Undercommunicating the vision by a factor of 10 (or 100 or even 1,000)

5. Permitting obstacles to block the new vision

6. Failing to create short-term wins

7. Declaring victory too soon

8. Neglecting to anchor changes firmly in the corporate culture

Talent as a top strategic issue

by Mary Beth Matteo, Founding Director of the S. Dale High Center for Family Business

The “War for Talent” will be a top strategic issue during the next decade. According to an article by Charles Fishman, “in fifteen years, there will be fewer Americans in the 35-45 year-old-range than there are now. At the same time, the United States economy is likely to grow at a rate of 3-4% per year. Over that period, the demand for bright, talented 35-45 year-olds will increase by say 25% and the supply will be down by 15%. That sets the stage for a talent war.”

Even in difficult economic times, it’s important to think about talent in a strategic manner, instead of as a short term tactic. Several tips include:

• Focus on recruiting/nurturing talent across the entire organization instead of just top performers

• Develop value-propositions for each different category of worker, e.g., Y-generation, older workers, information workers, middle-aged women, and cultural groups where appropriate

• Revitalize the HR function (some of the historical failures of HR have had to do with not having talented enough people in the function, and also not having the CEO’s attention)

Sum & Substance: If you've got talented folks in your company, they are as asset worth preserving. Hold onto them. At the same, make all employees the best they can be by managing their performance. A talented workforce can contribute to your strategic advantage.