How to Build a Sustainable Competitive Advantage

How do you build a Sustainable Competitive Advantage?

A good moat protects you

When Warren Buffet speaks, people listen.

Recently I happened to catch Warren Buffet on TV talking about how leaders should set business priorities.

Mr. Buffet was saying that, no matter the size of the business, you should operate your business like it’s a family business–one that you are going to hold onto for 100 years, and that the #1 thing you should think about is how to build a Sustainable Competitive Advantage, like building “like a moat around your castle.”

This is a great analogy. If you look back to medieval times, moats were excavated around castles as part of the defensive system–an obstacle immediately outside the walls–and usually they were filled with water.

A good moat made it difficult for your enemy to access your walls with siege weapons, such as towers and battering rams, which needed to be brought up against a wall to work effectively. A water-filled moat made it impossible for your enemy to dig tunnels under your fortifications in order to effect a collapse of the defenses. A good moat protected your castle and everything in it.

The wider your moat, the longer you can protect your profits. The deeper your moat, the more profitable you are.

“Understanding your customers” is key to building a good moat and creating a sustainable competitive advantage

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