The End of the Moat as we know it
In the past we have been taught that the ability to deliver quality products can form a strong economic moat.
Today, quality has been commoditized. It has become an enabler, but not a differentiator. Learn what the new differentiators are and what skill sets companies need to deliver them.
We have learned that a company should have a sustainable competitive advantage, or as it is also called, an economic moat. In the past, this competitive advantage was often based on a company’s ability to produce the highest quality products. This idea is pretty basic. A company that for some reason is able produce a better product can differentiate in the marketplace and convince customers to buy their product.
This goes in particular for safety critical B2B products, such as automotive parts. But it similarly goes for everyday consumer products, such as a deodorant, which, in a way, can be safety critical as well.
When we are analyzing a business, then we are interested to understand what this ability to produce highest quality products is based on. It can be based on a number of things. The company may be the proud operator of a well organized production facility, or of high precision manufacturing plants with skilled workers and outstanding quality controls. Their production technology or their product technology may be superior. They may be able to better manage the supply chain, or they may have access to some special resources. As varied as these skills are, there is a common pattern. These company manage certain processes better than their competitors.
image credits: PhotoDune, jorgosphotos