Different or done: The hard work of staying unique

Jeff Bezos’s last annual shareholder letter as the CEO of Amazon, written in 2021, recently resurfaced and it provides an interesting insight on how he views the time since Amazon started its services and what he believes the future holds. At one point, he references Richard Dawkins’ book The Blind Watchmaker to state that the key to Amazon’s ability to survive and succeed in the future, will be in its ability to maintain its differentiation, to somehow stave off the pressure that it will be under to merge into the normalcy of the business world.

“We all know that distinctiveness – originality – is valuable. …. What I’m really asking you to do is to embrace and be realistic about how much energy it takes to maintain that distinctiveness. The world wants you to be typical – in a thousand ways, it pulls at you. Don’t let it happen,” he concluded.

Then there is another founder-CEO, Aravind Srinivas, who talks about differentiation, but in a slightly different context. Srinivas’s firm Perplexity AI is engaged in a battle for supremacy in the GenAI chatbot segment where new offerings keep springing up like mushrooms on a daily basis, quite literally.

When quizzed in a podcast by another founder, Nikhil Kamath, on what distinguishes these different GenAI chatbots from each other from a user’s perspective, Srinivas observed that they were all essentially similar in what they do. “Honest answer right now is all of them are doing similar things. I'll just say it, as blunt as it can be. There's not really a genuine differentiation between ChatGPT or Anthropic or Gemini or Grok or Meta AI right now and, of course, Perplexity. Currently, excluding the search part, most models give the same answers.”

Kamath’s firm Zerodha incidentally, faces a very similar challenge in the discount brokerage segment where its unique model that was a strong differentiator, and helped it surge ahead, is no longer a USP. With later entrants mimicking the successful model, the difference between Zerodha’ value proposition and that of competitors has eroded significantly.

Same, same, but different

Bezos or Srinivas are not the first ones to talk about differentiation and its importance in business setting. Marketing and strategy gurus talk about differentiation as the essence of value creation and competitive advantage.

“If a brand fails to develop or maintain differentiation, consumers have no basis for choosing it over others. The product’s price will then be a determining factor in a decision to purchase,”, says David Aaker in his article in the MIT Sloan Management Review.

If you cannot be the cost leader (which consequently implies providing lowest prices), then differentiation is the only way to gain a competitive advantage, emphasises Michael Porter in his writings. However, even highly differentiated brands which were once market disruptors, sometimes struggle to maintain differentiation.

Creating strong differentiation entails getting three key factors right. Firstly, it must be based on the strength of the organisation. Secondly, the differentiator should be relevant and meaningful to the customer. 

Finally, the differentiator must be unique to the firm and not easily leveraged by competitors. Successful differentiation lies at the intersection of these three.

For instance, Volvo is very strongly positioned on safety, a benefit it owns more strongly than any other automobile brand. This benefit is also highly valued by Volvo’s target segment.

The strength of Volvo’s differentiation results from its relentless focus on enhancing safety. It has been a leader in safety innovations for decades, introducing many safety features that subsequently became industry standards, from three-point seat belts and rear facing child seats to run off road protection.

Gaining an edge

Creation of a successful differentiator can be a key factor in a brand’s success, but cannot guarantee sustained success unless the brand is able to retain its advantage in each of three factors highlighted above. As Bezos pointed out, the point-of-differentiation may get copied by rivals over time.

For instance, take the UPI payment soundbox. Paytm was the first to make available this very much useful tool to its merchants, which can effectively convey payment status, as and when it is received.

However, realising the value of the offering, soon enough, all the other players in the segment came up with their own versions. It’s difficult to be a UPI payment player these days without having a soundbox solution of your own provided to merchants who use your platform. So pretty quickly the soundbox moved from being a differentiated value add to being a hygiene factor.

Functional differentiation that is feature based, like in the above case, can be copied quickly. However, benefits driven by deep-rooted processes, eco-system linkages or higher order benefits, are difficult to replicate. Southwest Airlines, for example, held on to its differentiator of on-time performance for a number of years because this was rooted in its culture and processes which were difficult to duplicate.

Maruti Suzuki’s competitive advantage for years on end in the Indian automobile market has been driven by its extensive knowledge of Indian customers, expertise in fuel-efficiency, strong vendor partners and its extensive network of dealerships and service outlets covering even remote locations.

Imitation is difficult in such cases due to the deep-rooted processes and scale of activities which enable the brand to fulfil its promise to the customers. In all the examples cited, these brands were the first to own the highlighted benefits but they did not stop there. Continued investment and excellence enabled them to stay ahead on their differentiating benefits, even as competition tried to catch up.

Another way to avoid easy replication of a brand’s USP, is to focus on emotional and self- expressive benefits as differentiators. The brand-customer relationship created by such benefits can never be recreated by another brand even of it offers the same benefits.

Maggi instant noodles, became the market leader with its promise of a 2-minute snack. While it was the first to own this differentiator, this benefit was equally applicable to all instant noodles. Yet Maggi has ruled the roost for years, strengthening its differentiation over time by layering it functional value with emotional benefits linked to family, friends and “Maggi” experiences. While all instant noodles can be cooked quickly, none can compete with the Maggi memories and nostalgia.

In order to sustain differentiation, brands need to ensure continued relevance in the face of changes in consumer preferences and environmental and social trends. For instance, Apple’s periodic launches of newer, advanced models, often a source of aspiration and differentiation, is now facing flak from some quarters, as making older models obsolete is being viewed as environmentally irresponsible behaviour.

Creating a strong differentiator is the key to early success but differentiators need to be strengthened and refreshed over time for the brand to sustain its success. As category benefits become more standardised, new sources of value need to be tapped into. Those that manage continue to set their brand apart in a meaningful way, will lead the race, others run the risk of falling behind.

- Rohit Prabhudesai is an Associate Professor of Strategy and Consulting at the Goa Institute of Management, and Ruppal Walia Sharma is a Professor of Marketing and Head – Delhi Centre, at the S.P. Jain Institute of Management and Research (SPJIMR).