Three Steps to Differentiation Success

The pace of change is unheralded. Broad consumer trends quickly become widely adopted norms. Clubhouse competes with Zoom and Facebook as people seek new ways to connect and converse. Why watch (or listen) to someone else’s story when you can narrate your own?

My work with purpose-driven organizations spanning arts and entertainment, education, and financial services offers strategic lessons for executives in highly competitive industries like yours. Does your company have a differentiation strategy, one that converts competitive advantage into a decisive multi-year direction? It’s time to update your playbook.

Step 1. Center on your customer. In 2000, author Malcolm Gladwell coined the term “tipping point” to signify a point of inflection. As momentum sustains over time, a tip over to the new occurs. Several years ago, we tipped into the customer zeitgeist, an era defined by consumer power. Now we curate our lives on our terms, thanks to our smartphones and tablets. Numerous studies report that digital adoption accelerated dramatically in a matter of months during 2020, and we aren’t going back.

The customer zeitgeist has implications for your company, whether business-to-consumer (B2C) or business-to-business (B2B). local or global. Today’s consumer has the same expectations when they engage with a service or product enjoyed at home or work—increasing expectations for a seamless experience that spans digital to actual.

Research by international consultancies and thought leaders reveals that today’s customer expects authenticity, transparency, and a walk-the-talk demonstration of a deeper purpose. Social equity and inclusion are top of mind as well. Your customers’ new preferences and habits are unavoidable realities as you set a future strategy.

It’s time to re-engage with your customer to understand their preferences, choices, and behaviors. What are their must-haves today? What no longer registers as essential? Their answers will guide your thinking as you reality-check the competition.

Step 2. Reevaluate your competition. You can’t afford to ignore the never-ending rivalry in the customer zeitgeist. Your customer defines your competitive set as they scroll through an abundance of options. Algorithms and search histories offer an ever-broadening variety.

Typically when you conduct a competitive analysis, you categorize competitors as direct,  indirect, or substitute. Industry and market are the two defining attributes for categorization. Here’s a secret. That rubric worked when everyone stayed in their lanes. Let’s face it. There are no lanes anymore. Traditional industry definitions don’t limit your customers’ choices.

How might you consider the competition today? I categorize competitors as replacements, alternatives, catapults, and community builders. Replacements are comparable, while alternatives offer something novel. Catapults land unexpectedly in your customer’s lap. Community builders create spaces for the shared experiences craved today. It has never been easier to expand across industries. We can thank search engine optimization for reduced friction.

Here’s an example. A family searching for a fun activity might consider a park, museum, recreation center, streaming movie, gardening, or baking at home. Hello new competitors. In this example, families are motivated by novelty and engaging opportunities for all ages. They seek togetherness and value shared memories. If you are a museum CEO, you can’t assume that your only competitors are other cultural institutions. If you do, you’ll be surprised to learn how your offerings stack up.

An executive team seeking strategic differentiation will overlay fresh insights about their customers’ preferences with updated business intelligence on sweeping competitive changes. Digital adoption opens your customers to a world of options. Research reveals that customers are trying new brands like never before. Will new customers take a chance on your brand? They will if your differentiation clearly articulates uniqueness and relevance. It isn’t enough to be different. Special is your aim.

Psst, CEOs, and executive teams. It’s time to take stock of these new competitive realities. You can’t assume that what differentiated your company last year will position you for success next year. Your dialed-in customer is absorbing information as your competitors adjust to new market realities. Remember all that talk about agility?  You need a clearsighted view of competition, including the unexpected alternatives your customers crave.

Step 3. Claim your uniqueness. I’ve been privy to numerous conversations among executives and boards of directors about the importance of standing out. I’ve also heard leaders lament the challenge of demonstrating uniqueness. Here’s my advice. Strategic differentiation is essential today as digital adoption accelerates and industries shift before our eyes. Customer clarity allows you to focus on the attributes that position your company to outperform competitors. Your chosen strategy delivers on your competitive advantage.

Welcome to a new era for differentiation strategy. Your company’s roadmap to success begins with a clarity of customer, proceeds to a steely-eyed review of new competitors, and ends with a renewed commitment to delivering on your unique differentiators. Let me know how it goes.

Written by Karla Raines. Have you read?
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