A start-up could sell unique (aka differentiated) products or it could sell products that are sold by others:
- Differentiated product. Almost every start-up offers products and services that are unique in some way when compared to its competitors. These unique characteristics are called differentiators, and when selected appropriately become order winners (i.e., they may encourage customers to purchase your product instead of a competitor’s). Infinite ways exist to differentiate a product: new taste, totally new category of product, more prestige, more convenient, faster service, better quality results, newer technology, safer, smaller, and so on.Porter [POR80] captured this concept in his broad differentiated category of strategy, although Porter’s broad differentiation includes aspects of both product (“differentiation”) as well as target market (“broad”). Treacy and Wiersema [TRE93]’s concept of product leadership represents a specific example of differentiation in which a company aggressively pursues new solutions that obsolete all existing products, even its own. Companies like 3M, Apple, Hewlett-Packard, Intel, and Newell Rubbermaid are all well known as companies that follow this product strategy. Because start-ups have no history of products, it is hard for them to endeavor to obsolete their own past products. However, they can certainly embark on a path with that as a plan.
- Same product as competitors. Start-ups that sell products identical to or very similar to the competition will usually fail unless they have some other way to differentiate themselves. They will need something; for example, better marketing (to create more market pull), better distribution (to reach more of the market), lower price (to cause more price-conscious customers to buy), better customer service (to encourage return customers), or lower cost (to increase your margins or to enable you to lower your prices). I will discuss all of these in subsequent blog entries. Although start-ups rarely have the ability to execute on many of these approaches (i.e., they tend to stick to being differentiated), exceptions exist: Amazon started selling undifferentiated products online in 1995 with better marketing, better distribution, lower infrastructure costs, and lower prices than the competition.
The above is extracted from [DAV14].