Businesses often focus on building a competitive advantage via product differentiation. When accomplished it can be very rewarding, however, in today’s rapid technological pace the fast followers will erode that advantage quickly. In 1985, a Harvard Business School Economist named Michael Porter clearly established two different types of competitive advantages. Companies can gain by focusing on being the low cost leader or through ongoing differentiation. He was also clear on the point that trying to accomplish both simultaneously will result in mediocrity due to their conflicting nature. There is, however, one very common thread between the two: effective resource and capability utilization.
In order for any firm to sustain an ongoing competitive advantage via cost leadership or differentiation, the resources and capabilities of the firm have to be optimized above competition. According to the US Bureau of Labor Statistics, the cost of labor is one of the largest expenses and often second only to real estate.
Therefore, effectively acquiring, managing and retaining the right talent for your competitive advantage strategy is critically important. However, many leaders fail to focus on this baseline resource due to perceived subjective complexity. The right tools and resources are needed to demystify this effort.
Talent management in the following areas is crucial:
- Acquiring talent cost effectively
- Acquiring the right talent for the position and strategy
- Developing talent
- Measuring culture
- Measuring engagement
- Measuring and developing teams
- Talent matching to developing roles
- Leadership succession
- Acquiring feedback from separating talent
Receiving objective, measurable data in all of these areas is critical to building and sustaining a competitive advantage in either cost leadership or differentiation. Assessment and survey software with consistent, objective data provides one of the most important mechanisms to achieve these goals. But not all assessments are created equal. It is important to ensure the tools implemented along the employee life cycle are focused on the competencies for your key positions in order to be truly predictive. It is also important to use a consistent language in your measurements. Many organizations purchase varying tools for hiring, development, engagement, etc. Unfortunately, these are not using consistent measures. While they might provide transactional insight, they will not allow you to aggregate data over time for a more comprehensive analysis.
While technology is advancing, the underlying principles that drive competitive advantage have remained the same. The question is if you are focused in the right areas. Your organization should be engaged in most or all of these processes to maximize utilization of your most important resources and capabilities.