“Because the purpose of business is to create a customer, the business enterprise has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”
Innovation and marketing really do – or at least should – go hand in hand. Without product innovation you might as well close down operations today rather than tomorrow. It’s a great shame that most new products end up as failures, but there is a very good reason for this: Too much focus on ”business as usual”, not enough on customer value.
According to Clayton Christensen, a professor at the Harvard Business School, most companies make the understandable, but grave mistake of trying to outsmart their competitors by continuously developing products that are a little faster, better, smaller and so on. However, the customers don’t really demand these minor improvements: in many cases they just end up making the products more expensive without offering any real differentiation. And differentiation really is the name of the game.
Key Principles Of Differentiation
With so much competition, markets are driven by choice today; customers have huge choice, and companies that don’t stand out will get lost in the crowd. Indeed, companies must address differentiation in three key ways:
- If you try to be everything for everybody, you very soon undermine what makes you different
- If you ignore changes in the market, your difference can become less important and make you obsolete
- If you stay in the shadow of your larger competitors and never establish your uniqueness you will always be weak
These are some of the lessons taught by Jack Trout who, together with Al Ries, is one of the founders and pioneers of positioning theory: i.e. about how you create an impression in the customers’ minds that is different from your competitors’ position. One of the most successful ways to differentiate your company from the competition is through an innovative business model. Although many people associate business model innovation with the likes of Apple, Uber, and Netflix, the case of Xerox from the 1950's is as relevant today as it ever was.
Business Model Innovation
In 1959 Xerox introduced the revolutionary dry-process, plain-paper Xerox 914 copier. There was one problem though; it cost six times the price of the traditional alternative and consequently was extremely difficult to sell. Therefore, they had to develop a new business model. Rather than selling the machine, they leased it for $95 a month and charged a few cents per copy for copies made in excess of 2,000 per month. Due to the speed and convenience of the Xerox 914, customers started making many more copies than they had previously, which meant that the copier that could not be sold suddenly became a huge revenue generator - because of an alternative business model. You must find a way to do the same.
For further insight into how you can ensure your company makes the most of differentiation and stands out in the crowd please download our free whitepaper. 'Mission to Mars' is designed to take you from the highly competitive surroundings of Planet Earth to a more unique and profitable position on Planet Mars.