Competitive advantage is difficult to create. It’s even more difficult to sustain.

Community banks usually can’t achieve a cost advantage, especially in head-to-head competition with larger, high-volume institutions. That leaves differentiation as their primary method for creating competitive advantage. But that approach is also problematic.

It’s clear that technology is playing a bigger and bigger role in banking. But today most banks are using functionally identical systems to develop and deliver products and services. This uniformity of technology has resulted in commoditized banking – the antithesis of differentiation.

So while emerging technology can create a temporary advantage, sustainable differentiation based solely on technology is virtually impossible. To make matters worse, technology has actually eliminated some of the historical advantages enjoyed by community banks. Thanks to CRM, personalized service – once the sole province of community banks – is now possible for even the largest institutions.

Sustainable competitive advantage is created by leveraging your organization’s unique blend of attributes – brand equity, reputation, geographic footprint, specialized knowledge – and articulating it clearly and consistently to your market.

Corus Bank of Chicago is an excellent example of a bank that has achieved competitive advantage through specialized knowledge. Corus developed a deep expertise in commercial real estate lending, especially in niche markets such as office, hotel, condominium, apartment and industrial properties. Leveraging this expertise, the bank was able to increase its loan portfolio by 39% in one twelve-month period.

Greater Buffalo Savings Bank has achieved a competitive advantage as the only locally owned bank in Buffalo, New York. The bank was founded in 1999 by local investors to bring true community banking back to the western New York region. By 2004, Greater Buffalo had achieved an 82% growth in assets, 47% growth in deposits, 30% growth in loans and 167% growth in earnings. Clearly its market understood and appreciated the bank’s competitive advantage.

There is one caveat to creating and sustaining competitive advantage. Remember: it’s a moving target. Monitor your competitors. What are they doing? What are they saying? As your competitors change their tactics, so must you.