Propel Your Small Business to Success by Developing a Distinctive Competence

GVL is the trusted partner for small and medium businesses. We provide professional services and help SMEs adopt game-changing business best practices

When X (formerly Twitter) comes to mind, most people think of it as the go-to platform to find out what is happening around the world and discuss it. When Instagram comes to mind, you’re likely to think of keeping up with celebrities and friends through visual content. 

If you want to find out what people think about a hot topic, you go to X (formerly Twitter). If you want to keep up with the lifestyle of Cristiano Ronaldo, the world’s most famous footballer, you go to Instagram. 

When your business has a distinctive competence, everyone in the market knows what you do best. This helps differentiate you from competitors and is often a significant determinant of business success. 

As a small business, developing a distinctive competence can help you survive when other businesses around you are failing. Even better, it can help you thrive and grow. 

Read on to learn how small businesses can leverage distinctive competence to survive and thrive. 

What Is a Distinctive Competence?

A distinctive competence is a quality that sets your business apart and helps you win business from competitors. In a world where consumers have multiple options, a distinctive competence will bring a customer to your business because they want something that they know only you can offer. 

Importantly, a business’ distinctive competence must be from the point of view of your customers. 

For example, if you have a retail business that offers the best price for a specific item, that only becomes a distinctive competence if a majority of the market knows you have the best price for that item. Otherwise, your price doesn’t give you the advantages of a distinctive competence. 

It’s not about what’s in your head as a business manager or owner, it’s about what’s in the head of customers in your market. 

Why Is a Distinctive Competence Necessary for a Small Business? 

When a business opportunity is identified for the first time, those who are first to take advantage of it find it easy to do well. 

For example, when Airbnb started, it brought attention to the short-term accommodation business. Those who took advantage of this by listing their property or leasing property to convert it to Airbnb rentals did really well. 

With time, more people become aware of the business opportunity and develop a desire to take advantage of it. If the barriers to entry are low, then that space will soon become flooded. 

In the short-term accommodation business, the barriers to entry are relatively low. If you own a property, you just list it. If you don’t, you can rent and furnish a property, which will require some capital but is within the reach of a significant number. 

When a space becomes flooded and competition is high, if you don’t have a distinctive competence, your business will struggle and there is a high likelihood that you’ll eventually fail. 

It’s therefore important for small businesses to cultivate distinctive competences. It can be the difference between failure and success. 

Should I Start an Airbnb in Kenya?

How to Develop a Distinctive Competence in a Small Business

Step 1: Assess Your Business Environment 

One of the five game-changing business best practices we advocate for at GVL is customer-centricity and market knowledge. 

Success in any business requires an intimate knowledge of the market and industry. 

To develop a distinctive competence, it’s important to first understand the trends and opportunities in the industry you are in. Are customer preferences changing and how are they changing? Are there needs that are neglected? How is technology affecting the industry? 

Understanding where the industry is going is critical. However, understanding where the industry is at is also important. 

What do customers value? What affects their purchase decisions? What is the market size? In what locations are customers concentrated? 

Step 2: Conduct an Objective Internal Analysis of Your Business

After understanding your environment, it’s important to look inward and objectively assess your business. Ensure your assessment covers the following critical aspects of a business: 

  • Financial health: Look at factors like overall financial performance and the ability to raise capital. 
  • Marketing: Analyze factors like market performance and the success of your advertising efforts. 
  • Organizational & technical: Look at factors like the location of your business, how well you control your inventory, and the effectiveness of your organizational structure. 
  • Human: Assess factors like morale, relevance of employees’ skills, and the suitability of your compensation package. 

Business owners and managers often have a blindspot when analyzing their businesses. If you don’t go out of your way to ensure an objective internal assessment, the results won’t be as useful as they could be. 

Step 3: Carefully Study Your Competition 

While doing competitor analysis for a small business, it is most helpful to focus on the leaders of your industry. The objective is to learn what works. 

Look at what successful competitors did to become industry leaders. Specifically: 

  • How do they respond to demand? 
  • How do they create demand for their products? 
  • How are they perceived by the market? 

Step 4: Determine Your Distinctive Competence

After carefully studying your business environment, your competitors, and your business, certain comparative advantages or opportunities for differentiation become evident. 

It’s possible that over time, your business has developed a unique quality that can be cultivated into a distinctive competence. 

In some cases, you might spot an opportunity that, if worked on, could turn into a distinctive competence. 

Ideally, the distinctive competence you end up with should be what your business can effortlessly do compared to competitors to gain a sustainable competitive advantage. 

Step 5: Design and Implement an Action Plan for Fully Developing Your Distinctive Competence

It’s important to keep two things in mind regarding the process of developing a distinctive competence: 

  • Customer perception is what makes it a distinctive competence. Whatever unique quality your business has that your competitors lack, you’ll only benefit from it if your market is aware of what it is and the fact that you’re the only one who has it. 
  • While perception is important, distinctive competence must be backed by reality. If you successfully create a perception in the market that attracts customers, their experience must match what you promised. Any other scenario will be significantly counterproductive. 

You’ll need to design a business strategy to effectively take care of the two aspects above. Ideally, the strategy should be backed by an action plan, detailing who will do what and when it will be done. 

It’s important to consider the following: 

  • What communication strategy will you use to convey your distinctive competence to the market?
  • What is the cost of delivering the distinctive competence and how will you price your products after? 

The Takeaway

Having a distinctive competence increases the likelihood that a small business will achieve its growth potential. Without a distinctive competence, it will be difficult for your small business to survive, let alone thrive. 

Fortunately, any business can develop a distinctive competence by identifying opportunities in its environment, comparing them to internal strengths, and laying out an action plan to fully develop the identified distinctive competence. 

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