Exploring Ricardo’s Law of Competitive Advantage
When you focus on those activities that yield you the highest return – in economic terms, the highest net value per unit of work, and let others do everything else, you are maximizing your own competitive advantage.
It is important in business to monitor opportunities carefully. Ricardo’s Law of Competitive Advantage tells us that even when we are profitable at something, we could be more profitable if we gave that something up to focus on something that yields a higher return. Your competitive advantage is essentially how well you leverage the highest net value for each unit of work.
Leveraging Delegation for Competitive Advantage
People run into this all the time with delegation. Giving someone else something to do that you can do faster seems counterintuitive. Yet, while that person is doing that “other thing” you are doing a high-value activity that only you can do. Win-win.
In occupational therapy, I saw this with use of support staff. While they were helping my client learn how to use a new device, I was assessing another client to build their treatment plan. We were now seeing 2 clients in the same hour and earning 60% more (the cost of the support staff). Win. Win.
When you focus on those activities that yield you the highest return – in economic terms, the highest net value per unit of work, and let others do everything else, you are maximizing your own competitive advantage.
Anyone you delegate to should be able to complete that task to 75% of your efficiency and at a lower rate. Win-win, or now you are doing more and it is costing less. See the example of support staff in healthcare.
Or in another example, let’s look at an investment firm that used to generate leads from staff-delivered seminars. The firm decided to experiment with shifting the seminar delivery to an outside source. While the seminars were going on, their staff would be navigating leads and closing sales instead. The result was the seminars brought in less leads, but more of leads were closed. Profits increased. The most valuable resource – staff time – was protected for the highest value activity – closing leads.
Look at your business. Where are there opportunities to capitalize on your competitive advantage?
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Adapted from “Effectiveness 2.11 Ricardo’s Law of Competitive Advantage” by FocalPoint Coaching and Training Excellence, Copyright 2018, by Brian Tracy and Campbell Fraser. Reprinted with permission.
