To obtain higher performance, leaders must identify the critical obstacles to forward progress and then develop a coherent approach to overcoming them.

But good strategy looks past these issues to what is fundamental. From that perspective, the threats to the company are not specific new products or competitive moves, but changes that undermine the logic of its design.

But unless you can buy companies for less than they are worth, or unless you are specially positioned to add more value to the target than anyone else can, no value is created by such expansion.

Deepening Advantage

Start by defining advantage in terms of surplus—the gap between buyer value and cost. Deepening an advantage means widening this gap by either increasing value to buyers, reducing costs, or both…

Gilbreth’s lesson, still fresh today, is that incentives alone are not enough. One must reexamine each aspect of product and process, casting aside the comfortable assumption that everyone knows what they are doing…

Companies that excel at product development and improvement carefully study the attitudes, decisions, and feelings of buyers. They develop a special empathy for customers and anticipate problems before they occur…

Broadening the Extent of Advantage

Extending an existing competitive advantage brings it into new fields and new competitions…

Extending a competitive advantage requires looking away from products, buyers, and competitors and looking instead at the special skills and resources that underlie a competitive advantage. In other words, “Build on your strengths.”...

The basis for productive extensions often resides within complex pools of knowledge and know-how…

Creating Higher Demand

A competitive advantage becomes more valuable when the number of buyers grows and/or when the quantity demanded by each buyer increases…

Engineering higher demand for the services of scarce resources is actually the most basic of business stratagems…

Strengthening Isolation Mechanisms

An isolating mechanism inhibits competitors from duplicating your product or the resources underlying your competitive advantage. If you can create new isolating mechanisms, or strengthen existing ones, you can increase the value of the business…

When an isolating mechanism is based on the collective know-how of groups, it may be strengthened by reducing turnover.

When a product gives a buyer an advantage in competition with others, there will be an especially rapid uptake of the product.