Create a Sustainable Competitive Advantage

by Ken Garner

Association of Marketing Service Providers (AMSP)

I have been asked, “What’s next?” by a number of AMSP members who believe they have successfully transformed their companies to become Marketing Service Providers. The question is asked in a way that suggests a final destination at the end of a long road of transformation has been reached. I’m afraid I have some sobering news – the process of creating a sustainable competitive advantage never ends. It’s continuous.

Every business is defined by a cycle

This business cycle is best graphically represented by what is known as an “S-curve”. The base of the curve represents the business’ launch phase – the time at which a fresh and relevant value proposition begins to be rewarded with customer support. The stem of the curve represents the growth phase of the cycle. During this phase, business decision makers focus on maximizing profits. This phase typically involves heavy investment in assets required to increase the volume of production. It’s often characterized by a significant growth in debt as management is totally focused on “harvesting” and may be blinded by the success of the value the business is creating.

Danger lies at the top of the curve

The point at which the cycle tops out and begins to decline is known as the “stall point”. This reflects the end of the growth phase and represents a very dangerous point for the future of the business. According to Matthew Olson and Derek Van Bever, authors of the book Stall Points, only seven percent of companies are able to recover and return to growth after hitting a stall point. According to the authors, the average company loses 74 percent of its market capitalization in the decade following the growth stall. In short, the odds of surviving a stall point are extremely low.

Learn from the “S-Curve” and the stall points

Obviously, the first lesson is to avoid a growth stall that very well could represent the final chapter in the life of a business. But, the key to avoiding a stall point is understanding where your business is within the business cycle. In other words, where is your business positioned on the S-curve? You need to know how much life your current value proposition has left, a task much easier said than done.

Clues as to how much life your value proposition has left can come from a number of sources.

  • Examine the rate and pace of new sales.
  • Track customer retention and closely examine the reasons given by those customers who are opting to leave.
  • Develop an understanding of what your competitors are offering and the level of success they seem to be enjoying.
  • Constantly meet with your customers to see what their wants, needs and expectations are – not just for today, but for the future. What keeps them up at night?
  • Know how long you have been riding the “growth” or “harvesting” phase. It can’t go on forever!
  • Listen to feedback from your sales and customer service teams.
  • Attend trade shows and conferences that are related to your industry and your customers’ industries.
  • Read trade magazines that cover your industry and the industries represented by your customers.
  • Actively engage in your trade association.

Market Intelligence

Assess your company’s current situation, including strengths, weaknesses, threats, opportunities and competitive landscape. This is sometimes known as a “SWOT” analysis. This exercise often is part of an annual business planning or strategic planning session involving the business’ leadership team. Once you have assessed your current and desired customer landscape, you can identify the universe of available growth opportunities.

Following that, you need to research, prioritize and articulate a strategy that is in alignment with your objectives. The key is to understand that sustaining a competitive advantage is dependent on a continuous process of assessing the value your business creates and committing to an ongoing process of updating your value proposition based on the process described above. You need to understand where your company sits in the business cycle and what you need to do to jump the stall point. This is a journey without an end, unless or until you decide to sell or close the business.

Ken Garner joined the Association of Marketing Service Providers in November 2008 as its president and CEO after a 33-year career at United Litho. He served as director on the boards of the Printing Industry of Virginia, the National Association for Printing Leadership and the Graphic Arts Show Corporation, and as chairman of the Environmental Conservation Board, PIA’s Executive Development Program, the Graphic Arts Education & Research Foundation and NAPL. He is a member of NAPL’s Walter E. Soderstrom Society. For more information, visit www.mfsanet.org.