In a recent interview, Warren Buffet, one of the most successful business leaders in the world, was asked what is on the top of his list when he buys or invests in a company. Buffet responded simply “sustainable competitive advantage.”
The term competitive advantage is widely used but not really understood. What does competitive advantage mean for a business and for a sales team?
When I ask managers what their competitive advantage is, often times they mention computer systems, marketing support or closing times. While these items may be important, 99% of mortgage banking firms have similar attributes. Not much is unique there.
Competitive advantage is all about what a company or originator does best in their marketplace. So what does it take for a company to truly rise above the rest?
When Dan Kennedy, a noted marketing guru wrote about Buffet’s investments in a recent book, he discovered that 80% of the companies chosen by Buffet have a very high trust component — some by brand identity, others by direct, and in some cases, personality-driven relationship with their customers. The companies are a Who’s Who of commerce: Coca Cola, Goldman Sachs, Gillette, GEICO. The bottom line is that Buffet buys trusted companies because it is a sustainable competitive advantage.
This doesn’t mean that they are perfect companies. No. They make mistakes. (Anyone remember New Coke?) However, over the long haul, trusted companies do the right thing for their customers and employees.
Earning and maintaining trust with customers is always a difficult issue for management teams. Trust can be quickly lost with the pressure of quarterly earnings. But when building a valuable business, the lesson Buffet teaches is that trust is really the only equity a company or sales person has.
What have you done today to cultivate trust in your customer base?