A common mistake many businesses make (often as a result of being led by their FD or accountant) is assuming a set of numbers on a spreadsheet is a sound strategy for the future i.e. “this is what we need to achieve, therefore we will”!

Unless all elements of a strategy are balanced the only guaranteed result is failure.

We are not advocating that numbers are ignored, but that the focus should be on getting the strategy right first and then the numbers should drop out. By definition, if it is impossible to make money out of a strategy, then the strategy is wrong.

Porter’s theory of competitive advantage explains that if you have a real competitive advantage, compared with rivals, you operate at a lower cost, command a premium price, or both. Either way you command a higher margin and are best placed to make real returns.

Optimising your market proposition, and delivering it with the most efficient processes and the best people should guarantee that the numbers generated look good.

So, why is it important to know who your competitors are?

Ask any professional sportsman and they’ll give you a detailed answer.

Whether we like it or not we are not alone in our particular marketplace. So be honest, admit you have competition, and build a strategy that defines your company and your product and gain more success on the revenue line. Create competitive advantage.

So what does competitive analysis look like? At its most comprehensive it will produce an organisation chart, product/service overview, pricing and an evaluation of their Go To Market strategy. It will watch new products with a view to where they think the market is going. Why would you do this?

Pricing – It validates your pricing model

USP – It helps define where your solution differs from the competition

Potential weaknesses – It can identify areas to strengthen moving forward

Staff – It may be that you may identify a resource that is lacking in your company

Geography – It may expose opportunities to take your product into new markets (but bear in mind there is competition here too.)

Also, depending on your position in the product/service’s life cycle, it will help determine the future competitive landscape and the strategic direction you need to follow going forward. A good example of this is the car companies recognising new competition from tech businesses, and responding accordingly. A bad example of this is Blockbuster – enough said!

Using an outside expert can remove the bias and time burden to produce a focused result.

Infintec are contributors to the CFO Centre’s Scale-Up Experts Blog. Read our and many other contributions from experts here