Definition: 

• What it is: Companies that have achieved a competitively advantaged position that allows them to have superior profits will find that competitors will try and imitate them. There are a number of ways to maintain a competitively advantaged position that a company will need to implement to protect their position. To avoid imitation a company must erect barriers to their advantaged positions by inhibiting competitors' ability to: 1. Recognize, receive Incentives, Diagnose the source of advantage, Acquire advantaged capabilities, and Deploy them. Continuously adding sustainably advantaged capabilities that are valuable to the customer will maintain superior profits over time even if some of the capabilities are successfully imitated by competitors. To increase revenues and profits above the industry average level will require a company to maintain advantaged resource and capability positions over time.
• What does it do: Creating barriers that protect a company's competitively advantaged capabilities keeps competitors from successfully imitating them and protects superior profit positions.

Uses:

• How is it used: Identifying and protecting competitively advantaged resources and capabilities protects superior profit positions within an industry. Companies constantly fight against successful imitation by competitors to protect their competitively advantaged positions.
• Where: While this concept will help anywhere, there are some areas of focus to target:
• In Commodity industries, competitors should develop and protect competitively advantaged low-cost resources and capabilities
• In a Specialty/Differentiated Products industry, a competitively advantaged product or service can often command a significant price advantage incurring much higher profits than average for the industry
• In Brand sensitive markets an advantaged brand position can garner superior market share and profits
• Most industries will contain one or more of the categories above
• Why: Competitively advantaged positions are difficult to build and expensive to maintain, so it is critical to maintaining the advantage for as long as possible.

Limitations:

• Where it shouldn't be used: If you have a very small advantage, and it will be expensive to avoid imitation, it may not be worth it for you to expend the resources to avoid imitation.
• Any restrictions: None
• Warnings: If competitors find a way to imitate your advantaged position it is likely that your profitability will fall to the industry average, but your competitors will likely remain at the industry average. Imitation reduces your differentiation but does not increase theirs. So the industry average profitability will actually fall as your company's profitability falls back to the level of your competitors (decreasing the average for the industry). Therefore imitating a competitor's differentiated position will cost you money, but will likely give you no increased profit, so both you and the competitor will see your profits fall. The advantaged competitor will lose the profit associated with their differentiation, and you will lose profits because you increased costs, but did not achieve differentiation (only imitation) and therefore you will still only receive the industry average price, but now with a higher cost basis so your profitability will be lower. But if you do nothing, you will see your competitors achieve higher profits and potentially take some of your market shares. So the answer is to create a unique differentiation, not to imitate your competition.

Step-by-step process:

• Gathering data: Gather data on your competitively advantaged capabilities and resources and consider the existing barriers to imitation
  • Cause competitors to think - “I am not interested in picking a fight with a company that has an incentive to win that fight, and I can’t afford to stay in that fight.”
  • Limit pricing (a type of deterrence) – i.e. set your prices so low that competitors don’t see any value in trying to compete with you.
• Barriers to Recognition: What barrier exist so that the main competitors don’t notice you or don’t believe they need to pay attention to you
• Barriers to Incentive to Imitate - Deterrence, or a threat to punish imitators
• Barriers to Diagnostic - Causal ambiguity - make it difficult for competitors to diagnose the source of your advantage.
• Barriers to Acquisition - Make resources less mobile - embed them into the firm’s culture and processes. Utilize Patent protection as appropriate.
• Barriers to Deployment - Valuable only in Combination - Combine with other resources and activities, especially when these other resources and activities run counter to competitors’ prior commitments.
• Utilize Industry Analysis (see this library under Strategy Development) to identify sustainably competitively advantaged resources and capabilities
• Determine the current level of barriers to imitation that exist for each advantaged resource and capability
• Analysis of data: Determine if the current barriers are adequate to provide the needed protection for the current advantaged resources and capabilities. If the barriers are not adequate, develop a list of alternatives that could increase the barriers to imitation.
• Interpretation of results: Forecast the effect of each of the proposed new barriers and determine which scenario would have the most efficient impact on making the resources and capabilities sustainable
• Presentation of results: 
• Present the list of resources and capabilities that were analyzed.
• Demonstrate the barriers for each resource or capability.
• Compare the scenarios available for each of the proposed new barriers or improved barriers
• Show the recommended new barriers and the cost-effectiveness of the increased protection against imitation

Output representation and recommendations:

Presentation of results: 

• Present the list of resources and capabilities that were analyzed.
• Demonstrate the barriers for each resource or capability.
• Compare the scenarios available for each of the proposed new barriers or improved barriers
• Show the recommended new barriers and the cost-effectiveness of the increased protection against imitation

Examples:

Sustainable Advantage HBRLinks to an external site.

Additional resources:

Four barriers to the erosion of competitive advantageLinks to an external site.

Sustaining IT-Dependent Competitive Advantage: The Static Model