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A Differentiation Strategy

July 31, 2019

Choice:

In today’s world, being found and having a distinct differentiation from the other competitors being found is critical. Unlike in previous years, today’s consumers are usually well educated on our product or service before they call us. They no longer rely on salespeople to bring them information. In fact, many purchasers, even for highly technical products, prefer to educate themselves and then make a choice on which vendors they will contact before speaking to anyone. The challenge is to make sure you are one of the vendors they select. Here are some thoughts on a differentiation strategy.

Where to Compete

When working with startups or launching a new product within an existing company, following the process outlined in Nail It then Scale It (NISI) is a good idea. Of particular interest is an in-depth understanding of the market potential and business model. What is the problem your product or service will solve? How big is the market? Are the customers online, or are they reached through some other channel? Following the NISI process will make sure you fully understand where to compete and how to compete.

How to Compete

Especially if you have a commodity product, you may choose to compete on ease of purchase—next day delivery, free delivery, no-hassle returns, try-before-you-buy, etc. Perhaps you’ve found a high-end market that appreciates quality products more than anything else, so you will compete on quality and price is relatively elastic.

There are many examples of technology assisting in disrupting markets and companies. Uber, Amazon, Google come to mind. But there are many not so well known cases of technology making whole new ways of competing that were never before viable.

How to Add Value

I find that technology provides an opportunity to disrupt through innovating the business model. It’s fun to see exciting new products like autonomous cars. However, I have found that, for example, the way Tesla has totally changed how a vehicle is configured and purchased to be much more disruptive to the automobile industry than the all-electric, highly-automated vehicle itself.

A Tesla buyer need not go to a dealership or speak to any salesperson. Instead, the buyer configures the automobile online, fills out most of the documentation to purchase and register the vehicle online, and wirelessly receives software updates to improve the car, add features, or “fix” issues. So, rarely will the owner have to see a service representative. And, for small repairs, Tesla sends a fully equipped truck to where you are—work or home—to make the repair. An entirely different business model for purchasing and maintaining a car.

Bottom Line

Business Strategy is about achieving differentiation by making choices. “Where to compete” means choosing either a “Blue Ocean” strategy or deciding to compete in a “Red Ocean,” on a commodity product. Going head-to-head with a significant, entrenched competitor in its most substantial market may not make sense. “How to compete” comprises a channel and pricing strategy, as well as choosing the quality level for the offering. Finally, of course, differentiation on the “value add” means doing the work to determine how the way your company engages the customer reduces the friction of using your products in comparison to your competitors.

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