How Two Different Businesses Move Up The Strategic Position Matrix

After last week’s blog describing The Strategic Position Matrix, the question was asked: “How do I actually move up the levels?” Today, I’ll show you exactly how through two electrical contractors who started approximately the same time but ended up in very different places.

This story comes from real valuation work we have done. Both businesses looked similar from the outside, but one was worth significantly more than the other at valuation date. Here’s why.

The Two Starting Positions

Let me explain the difference between Position 5 (the most risky) and Position 4 in simple terms:

Position 5 – Resource Integration means you use the same tools, people, and same methods as everyone else. You just try to use your limited resources better. You compete mainly on price and how well you do the work.

Position 4 – Asset-Based Differentiation means you have created something special with your resources, that’s hard for others to copy. This might be location, special skills, product or service mix, or even key relationships that give you an edge.

Meet Marcus and David: Same Start, Different Choices.

Marcus and David both started electrical businesses some time ago in the same region. Both had the same qualifications, similar money to start (not much), and knew how to do electrical work well. Both went after houses, small shops, and light industrial jobs.

But they made very different choices about how to grow.

Marcus: Working Harder With What Everyone Else Has.

Marcus built Precision Electrical the way most sparkies do. He bought standard tools, hired good electricians, and competed mainly on price and being available when customers called.

What Marcus does:

  • Uses standard tools and work vans
  • Bids low to win jobs
  • Hires subbies when busy, lets them go when quiet
  • Does all types of electrical work
  • Gets customers through ads and word of mouth
  • Does good work at market rates

Marcus uses his people and tools well. His team finishes jobs on time, does quality work, and answers the phone quickly. But anyone with similar resources and good management can copy what Marcus does.

The problem: Marcus can only charge what the market will pay. Customers choose him mainly on price and whether he can fit them in. Any competitor with good people and systems can take his work.

David: Building Something Others Can’t Copy.

David started Highland Electrical the same way. But after 18 months, he saw something important: emergency electrical work was paying much better than regular jobs, but you needed to respond fast.

Instead of trying to do everything, David tried to find ways where he could work smarter and maybe increase price without also increasing risk.

David’s journey:

Year One: David saw that emergency commercial electrical failures paid premium rates but needed quick response. Instead of competing for everything, he started focusing on urgent commercial breakdowns.

Year Two: David bought advanced testing equipment that most local sparkies didn’t have. He got extra qualifications for high-voltage commercial work. He built relationships with property managers and maintenance companies.

Year Three: David won the electrical maintenance contracts for three large commercial buildings in town. This gave him steady monthly income and first call on any emergency work in those buildings.

What David owns now:

  • Exclusive contracts with major commercial properties
  • Special high-voltage tickets that limit who can compete with him
  • Expensive testing equipment that needs bigger investment
  • Strong relationships with key commercial customers
  • Deep knowledge of complex commercial electrical systems
  • Ability to charge premium rates for emergency and specialist work, that must be done urgently

The Results: Same Revenue, Very Different Values.

When I valued both businesses, the difference was huge:

Precision Electrical (Marcus): Even though Marcus runs a solid business, potential buyers could see that any good electrical contractor with decent systems could replace what Marcus does. Marcus has a job.

Highland Electrical (David): The exclusive contracts, special skills, and established commercial relationships created something competitors couldn’t easily copy. These assets generated higher prices, predictable income that others couldn’t just walk in and take. David has an investment.

The bottom line: Highland Electrical was worth more than double Precision Electrical, even though both businesses had similar revenue in their first year.

What This Means For Your Business.

This story shows three key things for any business wanting to move up the competitive ladder:

First: You need to choose a focus rather than trying to serve everyone. David gave up potential house jobs to build commercial expertise that was hard for others to match.

Second: You need to own something that stops competitors from easily copying you. David’s exclusive contracts and special tickets created barriers that protected his position.

Third: Building these assets takes time and deliberate effort. David’s move from general electrical work to premium commercial specialist took three years of focused investment in his time.

Questions For Your Business.

Look at your business through this lens. Are you working with standard resources like Marcus, or building competitive advantage like David?

Ask yourself:

  • What do you own or do that competitors can’t easily copy?
  • Which customers pay premium rates for what specialised work?
  • Where could you invest your time and scarce resources to create barriers that protect your position?

Moving from Position 5 to Position 4 means building something defendable rather than just doing the work better. You need to use your limited resources to create competitive barriers, not just coordinate resources more efficiently.

Next week, I’ll show you how businesses can move even higher up The Strategic Position Matrix, from Asset-Based Differentiation to Integrated Strategic Control.

For help working out your business’s strategic position and finding opportunities to build valuable assets, contact Kevin Lovewell directly on 1300 551 757.