The value of expertise

What happens when someone steals your idea and then competes with you? I recall this happening to me with an enterprise resource planning software product. One of my distributors reported that a consultant had copied our software and was intending to reverse engineer it. My immediate reaction was ‘good luck’. We had spent many years developing the software, building a distribution channel and establishing good reference sites. Anyone who thinks they can acquire deep expertise overnight is fooling themselves.

What I have come to recognise is that deep expertise can be as effective as the protection offered by a well-established brand, trademark or even a strong patent. We keep thinking that we need registered intellectual property (IP) to provide us with a competitive advantage, but knowing what to do and when can be a real winner. You only have to think of the years of training that professionals have to undertake to qualify to know that expert knowledge is hard won.

If everyone has the same knowledge then clearly there is no competitive advantage. You need to use this attribute of competitive advantage properly for it to work in your favour. That means going after a niche market, working on nasty problems and building up experience so that you can solve the problem better and faster than anyone else. You need to find an area of need where few people are prepared to put in the hard yards to build knowledge and experience. The best problems are those which require a lot of knowledge gained over many years or across many customer projects.

If you have a niche market with nasty problems, especially those which have a high compelling need, one strategy is to tie up the available source of that knowledge. If you build up a team of experts and therefore control most of the available source of supply of the knowledge required to deliver a solution, you basically own the market. Anyone who needs a solution has to come to you.

Premium prices are paid to people who solve nasty problems in niche markets, especially if the cost of delay or not solving the problem is very high. If you have a fire on an oil field, a ship which needs to be rescued, a security problem in your online payments system or concrete cancer in your apartment tower, you are not going to be overly price sensitive but you do want the best solution you can find. These types of problems often have very few suppliers as the knowledge and experience required to be effective takes many years to acquire. However, a great place to be if you have the solution.

This type of advantage can be acquired in many sectors. You need to identify nasty, complex problems which have a high compelling need and develop an expertise over time. If you are lucky, you may already have such a situation already but perhaps you haven’t been marketing it enough. Just remember that deep expertise is a great competitive weapon if used effectively.

Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.