From the bus stop on the way to work, your internet browsing at home, to the branded coffee cup in your hand, we are bombarded daily with hundreds of marketing messages and brand communications. The drivers behind these corporate campaigns are a range of diverse and inter related goods and services all fighting and competing for your attention and ultimately, dominant market share. Differentiation today, is more important than ever.
To put it simply by adopting a differentiation strategy a firm’s aim is to produce unique products and services for customers who value differentiated or innovative features more than they value low cost. A prime example of this would be the growing trend in popularity of Apple Inc products and the increased use of Google chrome and Google apps- all of which have innovation and design orientations. Through uniquely satisfying customer needs, firms that follow a differentiation strategy are able to charge premium prices and gain significant customer loyalty in the process. However differentiation should not only be subject to the technology industry. Dynamic capability can be utilized within any organization to identify possible primary and support activities that allow a firm to differentiate a good or service.
"Differentiation is the essence of strategy, the prime source of competitive advantage"
In the year 2000 the gaming industry was ruled by three big players; Sony, Microsoft and Nintendo. The level of competition between these companies was fierce and the industry was driven by their products; Sony’s Playstation 2, Microsoft’s Xbox and Nintendo’s GameCube.
It was not until 2006 when Nintendo began to implement a differentiation strategy that the dynamic of the industry shifted. Nintendo identified potential risks facing the industry, the most worrying of which was the ever growing complexity and the high user involvement required of video games, something that had no appeal to non gamers and people with busy lifestyles. Nintendo devised a radically different strategy aimed at targeting non gamers in order to create a potentially greater market free of demographics, experienced gamers and gender. Nintendo “thought seriously about what a game console should be” and launched its new console the Nintendo Wii in 2008.
“For some time we have believed the game industry is ready for disruption. It is what we all need to expand our audience. It is what we all need to expand our imaginations.”
Nintendo saw what the gaming industry what was doing and identified the potential of creating a console that would appeal to non gamers. The bridge to this opportunity was the Wii which incorporated innovation, design and a disruptive technology to the gaming industry, Motion Detectors, enabling real life simulation of various sports and games. The success of the Wii even allowed Nintendo to become Japan’s most valuable listed company after Toyota in September 2007. Many businesses would argue that they do not possess the tacit knowledge necessary to achieve “disruption through differentiation”
I read a great article in the December issue of HBR by Zook and Allen where they called the development and implementation of a differentiation strategy the “Great Repeatable Business Model”- It really is a great title and fits perfectly! Differentiation, as a strategy is certainly here to stay, as more and more businesses opt to implement it to remain competitive it is important they do not necessarily view it as requiring a complete re invention of the company’s products or services. Many businesses and top level managers hear the term differentiation and immediately think -new marketing research, new product development and of course, new costs. Differentiation strategy is more effective when viewed as a process for fundamentally building on core competencies, identifying the unique competitive aspects of your businesses offering and then delivering that differentiation to the customer.
Author: Declan Egan
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