Niche Differentiation Strategy in 10 Questions

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Updated 5 years ago

Using 10 Questions, I am going to help you define your niche differentiation strategy. What is niche differentiation strategy?

A differentiation strategy is an approach a business takes to develop a unique product or service that customers will find better than or in another way distinctive from products or services offered by competitors.

Therefore, a niche differentiation strategy is a differentiation strategy that is developed for a specific group of people in mind (“niche”) who share the same interests and want to purchase the same stuff.

Why Do We Need a Niche Differentiation Strategy?

In a crowded niche, competition can be fierce.

Sure we can always choose to find a less competitive niche, but going in this direction may not be consistent with what our true passions are, and/ or what current skill sets best apply to us.

This is when we must know how to leverage advantage over our competition.

To build an awesome niche differentiation strategy, we must always strive to achieve a unique, consistent difference that cannot be copied.

However to be truly unique, where do we start?

First, let's start by asking ourselves these 10 Most Important Questions.

Ask Yourself These 10 Questions

I will dive deep into each of the “10 Most Important Questions” to define your niche differentiation strategy in greater detail to gain a richer appreciation of what it takes to gain unfair advantage.

We will ask ourselves honestly such questions in order to provide answers about our competition to build an unfair advantage over them.

1. Our Customers

What enables us to say, “We know our customers and their needs” to gain a competitive advantage?

Special knowledge about your targeted customers is an unfair advantage. Learn to anticipate your customer’s needs for what they want in your first product and then your second one.

When your competitors fail or do a superficial job getting to know their customers that is your opening.

Ask the right questions. Develop strong personal relationships with your customers. This will quickly lead you and your employees to discover what your customers want in the first product and the following one.

2. Our Competition

What are our competitors’ strengths, numbers, chinks in their armor, patents, behavior patterns of their leaders, and more?

Real veteran entrepreneurs study their competition in depth starting with their CEO. They study their competitors with the same intensity professional sports coaches study competing teams. Your goal is to figure out how competing CEO’s will respond under competitive duress. Learn to spot their weaknesses.

Gossip and rumor networking are important skills for startups. Keep your ears and eyes wide open and listen for the rumors. Learn how to conduct covert CEO behavioral analysis, and this will add an additional powerful layer to your unfair advantage.

3. Our Capitalization and Investors

Which are the world class BEST or who are the most appropriate for your startup?

“Who are your investors?” Select your investors wisely. Your company will have to work with them for a half decade or more. Good choices of investors add to your unfair advantage.

4. Our Strategic Partners

Which are the corporations that can add clout and power to our new enterprise?

Select your strategic partners for power. Partners do not have to be large corporations. Choose smaller ones with key technologies or selling skills that can boost your unfair advantage.

Choose strategic partners that possess different skill sets from yours. Have a good reason to boast about why they are your strategic partners. That adds to your compelling story.

5. Our Strategy

What are the clever things we can do to outmaneuver the competition?

Think like a military leader. Think of what your competition will likely do in response to the launch of your first product.

It’s all about moves and counter moves. Be eager to create plans to respond to possible moves by competitors. Plot, plan, revise and modify, stimulate and emulate.

6. Our Progress

What is our head start, Early-mover advantage all about?

Be the first to get it RIGHT. Early is better than first. Pioneers often get a lot of arrows in their backs. The first technology generally loses. In fact, it can be the reason that brings a new startup to ruin.

Early Mover advantage is much better than first mover advantage.

A perfect example is Dell Computer Corporation. Dell seized the shakeout of the first phase of personal computers (IBM and Compaq) and found a niche of selling surplus PC inventories direct to consumers. Dell saw an overlooked market segment and focused on serving it best.

A well- prepared LATER entry into a new market is better than a poorly prepared one that is rushed. Try not to be early, and also try not to be too late.

Here are (3) Great examples:

The first personal digital assistants (PDA’s) were created and marketed by giant Japanese electronics firms, but until Palm arrived the market never took off. All the pioneering PDAs were sent to the garbage bin after Palm arrived.

The first true mainstream social media platform to achieve great initial success was Friendster, but where are they now? Friendster was Facebook before MySpace was Facebook, before Facebook was Facebook. But where are they both now? Facebook came later and crushed both of them!

An example of being “too late”: when Microsoft entered the PDA market too late and struggled to get sales.

7. Our Culture

What makes our company a fabulous place to work from our employee’s point of view?

A most powerful part of unfair advantage is knowing how to attract and retain the most top talented people in your organization. Their skills set the standard for excellence in your new enterprise.

Your first core “A” team is your most important ingredient to unfair advantage. And in order to keep your most valuable assets happy to stay, your new company must be a fabulous place to work. Company culture will attract your core team more than money.

Create a fun environment to work for. It’s all about how people treat each other on the job. And your employees can be your best recruiters. They are looking for something more rewarding in material, physical, and spiritual ways.

Continually offer then new challenges and a company culture they are proud of. Do this from the very first day, ad your company will have a difficult to match unfair advantage.

8. Our Compensation for Workers

What besides cash and options will attract and retain our best employees?

Be creative when building your compensation program. Today’s knowledge workers expect continuous learning and continuous training. Understand their values. Given them exactly that. When you can creatively compensate that kind of worker, you significantly strengthen your unfair advantage.

Take the necessary time to ensure that your equity plan becomes part of your unfair advantage. Layout stock option shares by the job.

9. Ourselves + Our Core Team + Our Key Contributors

What is the unfair advantage of each person?

How we communicate about ourselves is key to attracting the talented team and stakeholders we desire. Your message about our leadership will have the greatest impact on how we recruit top talent, get money, and entice contributors.

Become an EXPERT a telling strangers about yourself and your core “A” team. This is the only way to turn a mediocre idea into a world-class unfair advantage.

10. Our Big Breaks

How proven is our adaptability? In other words, what is our demonstrated ability to make good out of the best and the worst surprises?

How you cope with the bad breaks, surprises, and unexpected setbacks is part of your unfair advantage. Even in military circles, the “best war plans never survive the first test of battle.”

This is especially important if you are seeking to attract investors for your new startup.

Managing unexpected setbacks and surprises is the most important part of executing a business plan. As a leader for a fledgling business, the only thing that counts to investors is how as a leader you react to the inevitable surprises leading to trouble.

Define Niche Differentiation Strategy: My Closing Thoughts

Talk and learn from other entrepreneurs and startup leaders. How have they dealt with their past fiascoes and disasters? History reveals that many startups get into trouble and go out of business.

Be ready to share your war stories and your experiences with venture investors, and how you resolved difficult problems and worked through your disasters.

Learn to be comfortable telling colorful stories. This in itself, is an unfair advantage over your competition. Which is the true essence in defining your niche differentiation strategy.

As always, thank you very much for reading and I look forward to possible additions to this series.

Any and all of your comments are welcomed.

Cheers,

Kaju