As used generally, differentiation is associated only with product differentiation. But there are other forms as well. Many discounters apparently do not differentiate themselves at all; they achieve market dominance solely through price leadership. But before deciding this can be easily imitated, one should take a closer look at the underlying structures and processes which make price leadership possible. A more exact analysis reveals that the company has developed and implemented especially efficient processes and structures which are by no means so easy to copy. So while it is of course a simple matter to imitate price as a product feature, establishing the structures and processes necessary to ensure long-term profitability despite a low price is anything but a snap.

An important lesson to be learned by companies striving to differentiate themselves is that the “One size fits all” concept cannot be realized. A differentiated product line will not appeal to all of their potential customers; only a part of them will appreciate the specialness. An image addressing young people, for example, promising better value for their money may not attract other age groups and may even have the contrary effect. IKEA, organic supermarkets, even Apple may be extraordinarily popular among many people, but not everyone joins in the hymns of praise.

Consistently different

The more easily a company’s products or services can be substituted, the greater its dependency on its customers. Virtually no competitive advantage is permanent, so it is not enough to have a well differentiated product line. Sooner or later, it will be copied by the competitors, and the hard-earned competitive advantage vanishes into thin air. So the objective should be the acquisition of the capability to develop innovations over and over and not to be satisfied with the creation of one innovation. If a company is to enjoy long-term success, it must either generate, at relatively frequent intervals, new innovations and forms of differentiation which can be copied more easily and in a short time or it must aim for innovations and forms of differentiation which, because they are not so easily imitated, secure a lead over the competition in the middle and long term (see Figure 1).

Whenever an organization manages to design structures and processes so that they lay the groundwork for the development of long-lasting innovations, it will enjoy a clear advantage over its competitors. Every innovation can be imitated soon or later – but not the fundamental ability to set oneself apart again and again with new innovations. This ability is determined by structures and processes specific to the organization. As a rule, it is far simpler to imitate a product than to copy well-designed processes or even the organizational culture. But even that is possible in the middle term, which is why only those companies which are also capable of continuously evolving their processes and organizational features critical for success will be successful in the long run.