Business strategy is defined as the intelligent allocation of limited resources through a unique system of activities to outperform the competition in serving customers. Nestled in the middle of the definition, this idea of differentiation is perhaps the most overlooked tenet of strategy. Differentiation for competitive advantage in business has its roots in science.
In 1934, Moscow University professor G. F. Gause published the results of a landmark study. He placed small animals in a bottle with an ample amount of food. If the animals were of the same genus and a different species, they were able to live together peaceably. However, if the animals were of the same genus and the same species, they were not able to coexist. This led to the Principle of Competitive Exclusion, which states the following: “No two species can coexist that make their living in the identical way.”
Makes sense when we think about two male lions in the plains of Africa. After a while, one will be defeated and leave. Also makes sense in business. If two companies are doing the same things in the same ways and producing very similar products and services, after a while, one of them will be lunch. Think Barnes & Noble and Borders–Borders bankrupt. Think Best Buy and Circuit City–Circuit City bankrupt. The list goes on.
We’re so busy trying to be “better” than the competition, we fail to realize there is no “better.” Better is subjective. Is blueberry pie better than banana cream? Depends who you ask. But we know blueberry pie is different because it has blueberries, which have antioxidants, which are good for you, etc. It’s not about better. It’s about how are you different in ways that customers value? Amazon.com CEO Jeff Bezos describes his company’s approach to competitive differentiation: “You want to look at what other companies are doing. It’s very important not to be hermetically sealed. But you don’t want to look at it as if, ‘Okay, we’re going to copy that.’ You want to look at it and say, ‘That’s very interesting. What can we be inspired to do as a result of that?’ And then put your own unique twist on it.”
Consider your company. How different are the activities you’re performing from the competition? How different are your products and services? What’s that rumbling noise? Might just be your competitor’s stomach.