Companies have many differentiation strategies available to them as they develop new technology products. At a strategic level, competitive differentiation is achieved by adopting one of the value disciplines of competitive advantage: product leadership, customer intimacy and operational excellence.
In the Early Market, “product leadership” is your differentiation strategy, although it comes with a caution: all your initial marketing communication efforts must establish your core technology as radically new and innovative before you position your product as “leading.” This is because it is your innovative technology that allows you to establish a new product category and to attract first the technology enthusiasts. Once you get their approval, you can move on to the visionaries who want your product.
As your product category matures, you need to woo new customers that have different preferences from the Early Market. You then need to consider whether your competitive strategy should include elements of customer intimacy and/or operational excellence.
At a more tactical level, you can use a strategy canvas to ensure your whole product is differentiated. The strategy canvas is a diagnostic tool and, at the same time, a framework for action.
As a diagnostic, the strategy canvas provides a visual tool that captures the current state of competition in a market. It allows you:
As illustrated below, the horizontal axis displays the various factors in which the industry chooses to compete and invest.
Source: Kim, W. C. & Maubourgne, R. (2002). Charting Your Company’s Future. Boston: Harvard Business School Press.
In the case of Southwest Airlines, we can see that their strategy canvas includes both traditional airlines and car transportation—the two main alternative means of transportation for the market. The horizontal axis lists the competitive factors that generate customer value in the transportation market. The value curve is the graphic depiction of how each transportation alternative scores on the competitive factors.
The strategy canvas above shows that Southwest Airlines created a value curve distinct from both car transportation and traditional airlines on competitive factors that many travellers consider essential: low price, friendly service, speed, and point-to-point routes. This profile has the advantage of being focused—so it is easy to communicate—and appeals simultaneously to many traditional airline travellers and car drivers.
The following three steps outline how you can learn to understand your competition and how to beat them.
Kim, W. C. & Maubourgne, R. (2006). Blue Ocean Strategy. Boston: Harvard Business School Press.
Treacy, M. & Wiersma, F. (1995). The Discipline of Market Leaders. New York: Perseus Books.