The Power of Differentiation

It is interesting talking to people about starting a business and their entrepreneurial ambitions. I have found that majority of people believe that to start a business, you need a ‘revolutionary idea’; the idea has to be groundbreaking, never heard of etc etc. These people feel that until this is the case, any other idea is not worth it. Quite a few people have business ideas, but they feel that they are just incremental improvements to products or business models in existence and not worth implementing. The mental block being that any new business venture has to be a “Big, Grand step”!

• A business idea need not be revolutionary. If you can find a small ‘gap’ in the market or in existing business models, you could have a prospective good business. There is always opportunity for many players in the same kind of business/venture. If not, you would have found only one or two job sites, a couple of restaurant rating websites, only a couple of online travel booking portals and so on. So, do I mean to say that in a market with dozens of online travel booking websites, can you still start the 13th or the 14th or nth one? Yes! Will it work? Well, that is where you need to think “Differentiation”. You can start your own venture by finding gaps or weaknesses in existing business models in any field. So, why don’t all aspiring entrepreneurs do it, if it is so easy? Well, maybe because we as smart, intelligent, ambitious humans are always focused in grandiose ideas and finding the next big thing. We don’t or can’t find the small gaps that can become good business ideas. If finding those gaps were easy, everybody could be rushing to open his or her venture. Or maybe, well, the differentiation isn’t strong enough to develop into a strong business proposition!So, let’s get back to our online travel portal. Will you want to open one, when you know there are a dozen already there? The initial travel websites were what we can now call as “Plain Vanilla”. They offered users the convenience of booking their travel online. Then came holiday packages, hotel bookings and taxi bookings on the sites. Some bright guy then thought of tying with credit card companies to give cash back offers! Things evolved further – somebody thought of the business idea of allowing the user to quote the price he wants to pay! All these business ideas came from people who applied their minds on finding the unmet needs and new areas of differentiation in an existing business. All these new models wouldn’t have emerged had these entrepreneurs thought that online travel portals business is not worth entering as there are a few already there! How do you differentiate now- when all of travel booking portals are price competitive, give you cash back offers, feature most airlines, easy to use, equally reliable etc? How about a travel site with its own frequent user program? How about free airport pick up and drop for your frequent customers? How about getting people to bid for tickets? Maybe you heard of that one before too! There could be many ideas, but, then the purpose of this article is not to discuss opening an online travel portal! But, I guess the point is – look for small things the consumer wants - unmet needs or even ‘unknown needs’!Having found the “unique offering” or “differentiated product”, how do you ensure that you can use it to your advantage? Other businesses could copy your idea and provide the same product or service? Can you develop cost advantages? Can you leverage first mover advantage? Can you develop strong relationships that enhance entry barrier for other firms? These would be the next set of questions to ponder over.To put it simply, you need to think about some fundamental pillars of a business:Consumer: What would he like? Are existing businesses giving him all that he desires? Is there something that consumers may not overtly want because they don’t know what they are missing? Is there a segment of consumers that is not being paid attention to? Is their a consumer segment that will pay more for differentiated product or service?
• Product: Can the product or service be improved? Can you deliver something better? Can you develop a product which meets existing needs in a better way?
• Costs: Can you provide goods and services at lower cost? Is their a low cost model available/ possible?

Think “Differentiation” and maybe you come up with a viable, profitable business idea which could very well be the “next big thing”! All the Best!