The Second D Business Differentiators
Figure 2-11 shows the second driver for shareholder value as differentiation. Unless your business is completely unique to begin with, you are probably worrying about how you can make yourself appear different to your customers. Even commodity producers constantly look for ways to make their product more appealing to customers through more compelling packaging or other cosmetic differences.
Figure 2-11 Differentiators of the Business Value Framework
The Business Value Framework
Financial Drivers
Figure 2-11 Differentiators of the Business Value Framework
Financial Drivers
Business Improvement
Differentiators Disciplines
Business Improvement
Differentiators Disciplines
Aside from purely cosmetic changes, though, how can your business achieve differentiation? It turns out that true business differentiation can be achieved through a business focus on innovation, quality, and productivity.
Innovation, of course, allows you to create completely new products that address customer needs in unique ways. This approach has been the preferred one for technology firms, especially those devoted to the information technology market. Innovation requires, though, that you free up the human and capital resources necessary to create it.
Quality is another way to achieve differentiation, especially in commodity markets. If your product is inherently better from a form, fit, and function perspective, it is probable that customers will prefer it to the product of your competitors, for whom the quality level is not as high.
Finally, productivity is an enabler of differentiation because, if you are able to produce a product more efficiently, all other things being equal, you should be able to free up resources that allow you to focus on improving quality and innovation.
These three pillars of differentiation allow a business to carve out unique pieces of a market. They are data points that serious investors research when deciding where to place their money. Venture capitalists, especially, tend to favor businesses that are highly differentiated.
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