Most founders and CEOs can answer the question "what makes you competitive?" without much hesitation. They will tell you about their customer relationships, their quality, their team, their speed. They are not wrong. But they are answering the wrong question.
The right question is: where exactly do you win, with which customers, through which capabilities, and at what margin?
The gap between a broad answer and a precise one is not a matter of semantics. It is, in most cases, the difference between a business that outperforms its peers and one that competes on price by default.
Why Precision Matters More Than Most Strategies Acknowledge
Recent research from McKinsey found that top economic performers understand their competitive advantage at a more granular level than their peers, and actively use that understanding to guide where they invest, where they grow, and where they deliberately choose not to compete.
This is not a coincidence. Businesses that can identify their genuine edges at a micro level - specific customer segments, specific product lines, specific geographies or channels - are better placed to protect those edges, double down on what works, and stop haemorrhaging resources into areas where they are structurally disadvantaged.
The problem is that most companies, particularly in the mid-market and growth stage, operate with a competitive lens that is too wide. Strategy gets set at the company level rather than the segment level. Investment decisions follow historical patterns rather than evidence. And the question of "where do we actually win?" never quite gets answered with enough rigour to be useful.
The Four Competitive Positions Most Companies Actually Have
If you map any SME or growth business honestly against its customer base, you typically find four distinct competitive positions operating simultaneously.
- The Core - The customer segments, product lines or geographies where your competitive advantage is genuine, defensible and well-understood. Margin is healthy. Retention is high. You win on factors other than price.
- The Overhang - Areas where you are present and generating revenue but your competitive position is weak. You are winning on relationship, inertia or price. These segments are fragile and margin-dilutive.
- The Opportunity - Customer segments or markets where the structural characteristics are attractive and your capabilities are transferable, but you have not yet established a clear position.
- The Distraction - Areas that consume sales, management and operational attention without a clear path to competitive strength. Often legacy, often emotionally difficult to exit.
Most businesses treat all four positions as broadly equivalent. They are not. Resources committed to the Overhang and Distraction categories are, in effect, subsidising underperformance.
How to Build a Granular Picture of Where You Win
This does not require a lengthy research programme. For most mid-market businesses, the data already exists, it is simply not being looked at through the right lens. Here is a practical starting point.
Step 1: Segment your revenue and margin together
Pull your last 24 months of revenue by customer, product line or service and, where possible, by the account manager or channel through which it was won. Now apply margin data. You will almost certainly find that your revenue distribution and your margin distribution look different. The customers or segments that are largest by revenue are not always your most profitable.
Step 2: Ask the competitive question at segment level
For each meaningful cluster, ask: why did we win this business? Was it because of a genuine capability advantage, a relationship, a price decision, or something else? This question is best asked honestly and, ideally, in a structured conversation with your commercial team.
Step 3: Test defensibility
For the segments where you believe you have genuine competitive strength, ask how replicable that strength is. Is your advantage rooted in a proprietary capability, a deep integration with the customer, or expertise that takes years to build? Or is it based on incumbent familiarity that a well-resourced competitor could displace?
Step 4: Map it
Place your customer segments or service lines into the four-position framework above. This does not need to be a precise science, a working consensus among your leadership team is enough to start shaping better decisions.
What to Do With the Picture
Once you have a clearer view of where your competitive advantage actually sits, the strategic implications tend to be straightforward, even if the execution is not.
Protect and deepen the Core. This means investment: in relationships, in capabilities, in the things that make your advantage defensible. Most businesses underinvest here because the Core is already performing and attention naturally flows to problems.
Be honest about the Overhang. Relationships and legacy revenue are not always worth defending at any cost. If the margin is thin and the competitive position is weak, these customers are consuming capacity that could be deployed more productively.
Pursue the Opportunity with discipline. Moving into adjacent segments is the right growth play when it is based on genuine capability transfer, not on the hope that scale will eventually create advantage.
Exit the Distraction. This is the hardest conversation in most businesses. But the leadership time, operational complexity and sales effort consumed by areas where you cannot win is a direct drag on your ability to strengthen the areas where you can.
The Strategic Cost of Staying Vague
There is a reason that broad competitive claims are so common: they are comfortable. They do not require the leadership team to make difficult choices about where to focus, and they do not expose gaps.
But businesses that stay vague about where they win tend to make vague strategic decisions. They invest in growth without a clear thesis about which growth is worth pursuing. They spread sales resource across too many segments. They price defensively in areas where their value should command a premium.
The companies that consistently outperform do not have better people or more capital in every part of their business. They have a clearer picture of where their advantages are real, and they make more concentrated decisions as a result.
Granular competitive clarity is not a luxury for large companies with research budgets. It is a practical discipline that any leadership team can apply, and one that almost immediately changes the quality of strategic decisions.
A Note on Getting Started
If the honest answer to "where exactly do you win?" is "we're not entirely sure," that is not unusual, and it is precisely the starting point for productive strategy work. The analysis is rarely as complicated as it seems. The harder part is creating the conditions in which the leadership team can have the conversation honestly.
Allington Advisors works with growth companies and mid-market leadership teams to build this kind of strategic clarity. We are happy to have a confidential conversation about where to start.