Understanding Radical Differentiation

There is differentiation and then there is Radical Differentiation.

What's the difference between the two? This article explains it.

There are three things that you think about when you design a new business. These are:

1. Target market
2. Problem
3. Solution

Differentiation (or Simple Differentiation)
If you go after an existing target market and an existing problem with a new kind of solution, it is simple differentiation. For example, if you came up with a new kind of Tablet to compete with the iPad (as has happened with India's iPad competitor Notion Ink), then it would be differentiation. Other examples of products that are differentiated include:

Taco Bell - same target market and problem as Mc Donalds. Differentiated solution with the tag line "Think outside the bun."

Flip Video Cameras - same target market and problem as Sony Handycam. Differentiated solution with the ideas of simplicity and sleekness.

Radical Differentiation:
If you go after a completely new, hitherto unsegmented, target market, tackling a completely new problem for that market and offer a solution that, by definition lands up being completely novel and new for that particular market, then it is radical differentiation. Examples include:

Cirque Du Soleil - Circuses for adults (completely new target market.)
Disney Phone - Cellphones for kids (available only in Japan; completely new target market)

The danger of Radical Differentiation is that the new target market may not be ready to embrace your product (gap in the market versus market in the gap) or the market may take too long to develop. But if it clicks, then you become the undisputed leader with very little that the competition can do to dethrone you!

Now one might argue that products that are not radically different have been runaway successes. Examples include:

1. iPod (was not radically different from MP3 players.)
2. Microsoft Excel (was not radically different from Visicalc)

The counter to this argument is this. If you are an existing mega business with an existing beach-head (in terms of customer base, branding, existing technology platform etc.) you can afford to do simple differentiation and still succeed because you can leverage your existing resources. But if you are a start-up starting from zero, then you will find your business going nowhere with simple differentiation. For example, if you said that you're going to start a Facebook with better privacy controls, you may not succeed that well. But if you said that you're starting a social networking site for millionaire's you may have a better chance at success.

Radical differentiation is particularly important in the online world where winners in a category take all. It's less important in fragmented industries (for example, you can be an architect, a lawyer, a lawn mover or a taco bell truck operator and still get business without radical differentiation.)