Ring-fence your Competitive Advantage

In his seminal book, ‘Competitive Strategy’, Michael Porter talks about ‘industry forces’. Richard Rumelt challenged this and it has since become established thinking that business factors are more important drivers of performance than industry factors. The lesson here is that you can succeed in ‘difficult industries’, even during challenging economic circumstances.

Great you say, but how? Rumelt went on to coin the term ‘isolating mechanisms’ to refer to the “economic forces that limit the extent to which a competitive advantage can be duplicated or neutralised through the resource-creation of other firms”.

Essentially, isolating mechanisms are to individual companies what barriers to entry are to an industry. These include ‘impediments to imitation’ that prevent rivals from duplicating critical resources and capabilities, such as patents, copyrights, trademarks, licenses and importantly, brands.

Superior collaboration with customers and economies of scale also serve as strong impediments to imitation. Early-mover advantage can create a powerful momentum, increasing the quantum of that advantage relative to other companies over time, yet this needs to be managed carefully to perpetuate a truly sustainable competitive advantage.

What is clear is that intangible asset management will become increasingly important to marketers. How can you build ‘impediments to imitation’ into your business?