A popular view is that in an industry, there tend to be only a few leaders and several followers. Another view is that a typical industry structure comprises one pioneer, a few innovators and several followers. A more refined view is that a typical industry structure is better defined by a pioneering innovator, a few incremental innovators and several followers. In emerging markets such as India where barriers to entry are low and barriers to innovation are high, and where technologies are imported and replicated, the typical industry structure is fragmented with several look-alike players. Yet, industries in emerging markets are characterized by intense competition with look-alike products or services trying to be similar and different simultaneously. Some industries in India such as consumer goods and pharmaceuticals are archetypes of industries where look-alikes wage a no-holds barred war to be different.
The unique nature of industrial development in India (probably even in China and other Asian markets) which promotes small and medium enterprises facilitates regional development of local enterprises which clone a few national companies. The emphasis is on being different in terms of branding and packaging or in terms of marketing and promotion. Multiple brands with little to claim by way of differences in product characteristics compete to be different. In most cases, the channel becomes an enabler while packaging, promotion and pricing become differentiators; the core product or service has little to differentiate itself. Even highly technology driven products find it difficult to remain differentiated as technology and manufacture become commoditized. The smart phone industry which was a technology flagship is a classic example. This blog post proposes that an approach that accumulates and aggregates technological developments in terms of five smart differentiation principles is the key to sustainable differentiation.
Differentiation is not merely being different. When every smart phone has a rectangular profile, the beleaguered BlackBerry has come up with a square design. It is different certainly but is not seen to be offering a new benefit that could make it a popular smart phone. Samsung’s Note 4 has an edge design to bring differentiation to the ageing phablet line-up and so does LG curved smart phone. These are different designs certainly but are seen to be complex to operate. The rotary Wankel engine brought a revolutionary engine to automobile design but had little to offer as a differentiater to the customer. In contrast, the phablet, although in one sense a large scale small phone or a down-sized tablet, became a differentiated product. Extending 2 wheel drive to 4 wheel drive has become a differentiating factor for rugged all-terrain SUVs.
Differentiation arises primarily from a unique combination of innovative product design and superior functional utility. It can arise also from superior customer service which often emerges from deployment of unique technologies. In some cases, companies get associated with certain industry leading characteristics that extend beyond products. Good examples are Apple getting associated with product elegance, Toyota with product quality, Shinkansen (Japanese Bullet Train) with timeliness, L&T with construction quality, Tatas with ethical business, and Harvard with management education, for example. All of these position the product or the company in a differentiated manner in the eyes of the consumer, evoking trust and confidence. Differentiation leads to respectful recall of a product or service by the customers at one level and expectant anticipation of a new differentiated product or service at another level.
Cumulative and aggregating
Differentiation is rarely a one-time occurrence. Like learning, differentiation is a cumulative experience. Continuous differentiation alone can place a firm or a product line as truly differentiated. The challenge here is one of ensuring a raising bar of differentiation, and leveraging design, manufacture and marketing to raise above the raising bar through successive product introductions. One of the most striking examples of such differentiation has occurred in the field of medical imaging and radio/laser therapy domains, with successive developments achieving sharper imaging and more precise surgery respectively. Incessant march of technology is the principal support for continuous differentiation. This includes a clear understanding of the deficiencies of current technologies and development of gap-filling technologies.
Like learning, differentiation is a judicious combination of specialization and diversification. A door locking mechanism can become more specialized in terms of mechanical sturdiness, key grooving complexity and multiple turn locks. A door locking mechanism can also be made different through number locking or biometric locking (finger print or iris). By combining the features of all of the four approaches, however, a truly differentiated locking mechanism can be developed. The success of the lock maker as a differentiated lock maker would thus depend on specializing in the core locking technologies and integrating diversified locking technologies. The same has been true for watch making too. Mechanical capabilities are integrated with a range of digital technologies, including GPS technologies. The next frontier in watch making is opening up with integration of cellular and medical technologies. Differentiation is a resultant of cumulative and aggregating technologies.
Differentiation would appear to pose challenges of a highly investment-intensive and design-specific technological process. Firms believe that huge upscale investments in R&D would be required to be a differentiated firm. As a result, many firms would choose to be fast followers or licensors rather than pioneering differentiators. The reality, however, is that differentiation is as much a function of smart use of technology as it is of intense development of technology. There are certain principles of smart differentiation which can help firms become and stay differentiated even with reasonable investments in technology. Observation, Sensing, Imagination, Learning and Timing (OSILT) are the key to smart differentiation. The following five principles of the OSILT model of differentiation illustrate.
Observe a future
One of the fundamental drivers of smart phones has been the camera technology. Integration of camera functionality of increasing sophistication with higher megapixels and photo editing software has differentiated successive generations of smart phones. However, until recently all makers gave increasingly superior technology (up to 20 megapixels level) to rear cameras and allowed the front cameras to languish at a 2 megapixel level. Clearly, the established notion that cameras are only to take pictures of others has been so deep-rooted that even the most innovative smart phone makers perpetuated the past despite the hugely increasing popularity of selfies for the last few years. It is only now that a few makers are providing an equally capable front camera in smart phones. The lesson is that the key to differentiation could be so obvious that it escapes attention. Smart observation can help utilize available technologies to achieve substantial differentiation.
Sense a future
Sensor technologies are emerging to be game changers as computer chips have been. Virtually any product can be refined or re-engineered with sensor technologies. Some of the earliest applications have been on the shop floor with sensor driven line logistics. Today, driver-less cars are a practical reality due to sensor technologies (coupled with imaging, navigation and telecommunication technologies). Biological sensors would be the next frontier in sensory technologies helping the individuals and healthcare sector provide proactive and effective healthcare delivery.
Imagine a future
Differentiating individuals or entities are good in imagination. They constantly imagine how life can be made better. Magnification technologies have revolutionized surgeries. Cellular labeling could provide even greater precision in future. The emerging use of drones for a number of applications is a practical example of how imagination provides new differentiated solutions. One may imagine how a Bed and Pillow Combination (BPC) could move from being just a sleep aid to being a health monitor and wellness provider. Given that sleep of 6 to 8 hours, on an average, is the typical daily routine of an individual it is easy to imagine that BPC has a much better potential to provide wellness than an annual medical check-up!
Learn a future
Future is built by individuals who learn constantly. Learning comes from a host of inputs. A designer who is entrusted with differentiation, however, has a special responsibility. While books of science and engineering, design laboratories, simulators and testing arenas are all essential for the designers to learn and develop, the greatest learning comes from the practical behavior of current products in the field. The linkage between the designer and user has to be set in the real time world rather than through observations and analysis of market researchers. In differentiated companies, individuals of all departments, including the CEO, learn from the marketplace on a continuous basis.
Time a future
There are two views on innovation-led differentiation. One is that an innovation would be off mark if it is commercialized ahead of market preparedness. The other is that prompt introduction of innovations creates its own markets. If any or all of the above four methods of are utilized to develop a differentiated product or service, it would be an injustice to socio-economic development to hold back on such differentiation. That said, certain geo-political or socio-economic considerations dictate or influence the timeliness of innovations. Given India’s developmental aspirations, innovation and differentiation that support development of smart cities, good governance and Make in India would be timely for a new future for India.
OSILT as a design faculty
Competitiveness of a business accrues from superior faculties. Adoption of methods of sharp observation, sophisticated sensing mechanisms, imagining the use of ordinary to deliver extraordinary, learning from the past as well as the present and timing the innovations ought to be developed as a core faculty for designers. This would imbue them with the ability to make products or delivers services that are not merely different but more importantly truly differentiated. Development of such an OSILT faculty needs to be a strong cultural facet of differentiated organizations.
Posted by Dr CB Rao on December 25, 2014