Strategic Differentiation

by Paul Simister on July 28, 2011

Is there a difference between strategic differentiation and non-strategic differentiation?

I think there is and it’s important to understand.

It’s easy to fall into the trap that all differentiation is strategic because differentiation is one of the main ways to creating competitive advantage and that’s at the very core of business strategy.

But it’s not true.

Not all differentiation is strategic

I’ve written before about the issue that differentiation can be shallow – this is differentiation which is manufactured by a marketer trying to sell the sizzle.

Unfortunately that’s differentiation based on deceiving customers into thinking they are buying something special when they are not and it can backfire badly if you over-promise and under-deliver. There are plenty of people who believe all marketers are liars. The more times they feel duped, the more it reinforces the idea that no marketer can be trusted.

What is strategic differentiation?

Strategic differentiation needs to be built on a much deeper foundation based on what is happening inside your business in terms of developing special capabilities and resources and the people, processes and procedures that ultimately deliver the differentiated promise.

There also needs to be a clear direction in your differentiation development.

It’s a big mistake to think that you differentiate your business once – either at the start or when there is a performance crisis – and then you can ignore it as you get back to your daily tasks.

Effective strategic differentiation doesn’t work like that.

How to make sure your differentiation is strategic

You first set a direction for how you want to be positioned in the mind of your target audience and then you continue to develop your differentiation and positioning.

The world doesn’t stand still around you.

As existing customers adapt and new competitors enter the market, your differentiation is threatened. You may have been so success that you turned one of your key factors of difference into a key success factor for the entire market. Suddenly what made you special becomes a “must have” for every competitor. The faster they are able to copy, the quicker you need to respond by either strengthening your performance, making it more certain or adding an extra factor of differentiation.

Customer needs also change and can make your key differentiation factors irrelevant or much less important. That’s why my differentiation process looks at what will help you win in today’s market and also how you can keep winning as the market develops.

If you don’t set a strategic direction for your differentiation, you risk making changes which confuse the perception of your brand. And if customers don’t know what you stand for, you’ve gone back into the crowd.

Second, you need to choose your differentiation factors carefully.

They need to be based on what you can deliver efficiently and effectively. Your differentiation needs to be profitable and that means keep your costs low on everything except your key differentiation factors.

You also need to look for differentiation factors which present a challenge for competitors to copy.

Since your differentiation needs to be visible to the market, they should know about it if they do any competitive intelligence gathering.

That doesn’t mean that they can identify how you do it, because the differentiation is embedded in the fabric of your business.

Alternatively they may be able to tell how but either:

  • Not be able to copy you because you have special skills and resources; or
  • Not want to copy you because following you compromises some other part of their business.

There’s a lot to strategic differentiation. It’s not easy to do with clear thinking and focused application.

But that’s why the rewards are high when you get it right.

Paul Simister is the business strategy coach who helps business owners to differentiate their businesses and develop winning strategies. Get your free copy of the ebook The Six Steps Profit Formula.

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