The Reluctant Entrepreneur: Turning Dreams into Profits

NEVER LOSE YOUR COMPETITIVE EDGE

What do you think Warren Buffett, one of the most successful investors in the world, looks for in a company? It’s something he calls “durable competitive advantage.” It’s what ensures that a business that is doing well now will still be doing well in 10 or 20 years.

It goes back to the Unique Selling Proposition (USP) that I spelled out in Chapter Seven. Your USP is what makes you different and/or better than your competitors. That’s what gives you an edge in the marketplace. It’s the reason your customer buys from you instead of someone else. And it rarely has anything to do with price.

For instance, it’s much cheaper to buy a cup of coffee from McDonald’s than from Starbucks. So why is Starbucks still in business? Because they have made the Starbucks experience their competitive advantage.

When you go to Starbucks for a cup of coffee, you’re going for more than a cup of coffee. The store looks upscale. It smells great. The beverages have special names. Customer service is superb. You’re also aware of the company’s high standards. They publicize their social and environmental responsibility. You feel good about spending your money on their ethically sourced, fair-traded products.

McDonald’s got some good press by adding premium coffee to their menu, but they’ll never have Starbucks’ competitive edge. It’s what Warren Buffett calls the “moat” around the economic castle.