The Wisdom of Differentiation
- Clearly identify who it wants as its customers
- Articulate a value proposition
- Become more domain focused
- Demonstrate a high degree of competence in one area
- Be willing to walk away from non-core business
- Be able to demonstrate through leadership in its segment
- Invest in continually developing high degrees of specialization in specific areas
- Integrate the specific differentiation in all aspects of its operation
Clearly, this is easier said than done, because it creates challenges as well, including:
- A smaller initial addressable target market
- Potential of slower rate of initial growth
- Higher investment requirements to establish traction in one specific area
- Time required to establish appropriate positioning
- More stringent hiring requirements
But in the long run, it is absolutely the right thing to do for most companies. It requires re-examining a company’s positioning and differentiation on a continual basis to ensure the value proposition remains of value to its customers.
In the end, commoditized companies will be valued based on market comps. Differentiated companies are valued based on their strategic premium.
So, go ahead and create your differentiation. As Herbert Read said, “Progress is measured by the degree of differentiation within a society.”
Ivan Nikkhoo is an experienced entrepreneur, investment banker and VC focused on the life cycle of tech companies. He is a Managing Director at Siemer & Associates and an advisor to Siemer Ventures.