Differentiation: The difference that makes a difference
Some people have a unique ability to see what’s missing—what isn’t there but should be. Ram Charan—prolific author (29 books, three million sold), consultant, and CEO—is one of them.
In Rethinking Competitive Advantage: New Rules for a Digital Age, he notes that, as a member of seven corporate boards, he has reviewed about twenty strategic business plans from major corporations per year for the past twenty-five years.
The plans, he explains, are “heavy with assumptions about the future, past historical data and accomplishments, and include so-called SWOT analysis (strengths, weaknesses, opportunities, and threats). . . . Many are prepared with the help of a high-caliber consulting firm.”
Then he adds, “Guess what they don’t include, ever. . . . They omit a clear description of why the consumer prefers them.”
As I explain in my book Differentiation Strategy: Winning Customers by Being Different, differentiation is about being different in a way that causes customers to prefer you to your competitors. You can be different by doing something unique, doing something uniquely well, or both. That “something” can be anything from your product or service to your sales and marketing activities, customer relationship program, or channels of distribution.
Whatever the case, it’s not just about being different than your competitors. It’s about being different in a way that provides more customer-perceived value than they do. As explained in a previous blog, one way to define customer-perceived value is Value = Benefits – Price. Or, by putting price in the back of our minds, we can simply say that Value = Benefits. To my way of thinking, there are six kinds of benefits—physical, mental, emotional, social, economic, and risk reduction. So, what you do that’s unique, or what you do uniquely well, must provide customers with one or more of the six kinds of benefits.
Consider the following figure where the (not very bright) chickens ae competing to be selected for the farmer’s chopping block. The two chickens in the left panel are the same size, which is to say, they are undifferentiated, so the farmer has no preference for one or the other. In other words, the offerings in this barnyard are commoditized. Compare this to the right panel, where the plumper chicken is different in a way that causes the farmer to prefer him to his competitor. In this barnyard, the plump chicken is differentiated.
In short, differentiation is about having a difference that makes a difference.
Kevin W. Holt, the founder of Co.Innovation Consulting, is a strategic planning consultant and meeting facilitator based in Phoenix, Arizona. He works with commercial, government, and nonprofit organizations to develop innovative strategies and solutions. His strategy consulting and meeting facilitation practice centers on the use of proven processes mapped to collaboration technologies (e.g., electronic brainstorming) and specialized software tools (e.g., the Blue Ocean strategy canvas). The technologies enable him to serve as both an offsite meeting facilitator and a virtual meeting facilitator for strategic planning workshops, innovation labs, brainstorming sessions, feedback sessions, and other types of meetings. Kevin is the author of Differentiation Strategy: Winning Customers by Being Different, published by Routledge in June 2022.