While the term unfair competitive advantage may be used in other contexts, it is specifically used to define what smart entrepreneurs, venture capitalists, and startup consultants look for as a key ingredient in the formation of a new venture.
So just what is a competitive advantage? A competitive advantage is the set of conditions and attributes that allows a business to offer its consumers greater value than its competitors. The greater value is provided either by selling products at a lower price or by providing greater benefits and service. For the customer, this justifies paying a higher price than the competitors are charging. The conditions and attributes that provide the competitive advantage ensure that the business can outperform its competitors by generating more sales or by achieving superior margins than its competitors.
For example, an unfair competitive advantage might occur for a startup via:
- Insider knowledge due to the insider information or market intelligence that a startup founder may have gained from working in the industry where the startup intends to operate.
- Existing alliances due to the startup founder’s existing strategic alliances with key players by virtue of long-term friendships or even family connections, giving the startup much-needed early traction in a market, and which is not available to others.
- A gift that the startup founder is born with that just happens to be the key ingredient required for success in the new venture. It may be intellectual (problem solving), creative (thinking outside the box), social (empathy), perceptual (insight), or physical (endurance).