Technology service providers can increase market share by thinking differently about product differentiation.
In the crowded technology industry, competitive differentiation is one of the most difficult tasks that technology service providers (TSPs) face. When trying to differentiate their product or service offerings, many TSPs fall back on features and functionality rather than advancing customer value.
Significant improvement in product or service success now demands differentiation ’from and beyond’ the product
Despite the significant investments TSPs make in new products, failure rates range between 42% and 80% across the technology industry. Although rates are better for well-established vendors, it’s clear that substantial room for improvement exists across the sector.
“Significant improvement in product or service success now demands differentiation ’from and beyond’ the product,” explains Ed Cordin, director of content strategy at Gartner. “Market disruption can be catalyzed only through relevant and targeted combinations of differentiation that cannot be easily matched by competitors.”
He adds that beyond the product, factors such as a defined business model and customer experience are increasingly part of an expected and connected differentiation mix.
Although many TSPs strive to find previously undiscovered or breakthrough combinations for differentiation, none enjoy limitless funding for experimentation. It is vital that providers have a clear rationale of what a sufficient combination for differentiation looks like and how it might work in the long term.
Assess current differentiation reliance
TSP differentiation has historically focused on product attributes. Although this might provide a good foundation for differentiation breakthroughs, TSPs need to assess their current focus and reliance on specific forms of differentiation and use them to create options for improvement.
Potential differentiation can come from various types of innovation and assets:
- Product aspects: Function, what the product does; aesthetics, what the product looks like looks; and usability, how easy it is to use and/or learn or the product
- Own intellectual property (IP): What you choose to develop and possess full intellectual rights for
- Business model: How you intend to monetize the use of your product
- License and pricing model: How the monetization is implemented for use cases/segments; aligned with, but distinct from, the business model
- Technology alliances: To ensure suitable access and rights to market-specific technologies
- Go-to-market partnerships: Finding routes to market that buyers prefer and your competitors may not expect
- User experience: Focus on how products materially impact users and create individual or organizational benefits
- Customer experience: How to design or anticipate the customer or segment experience before, during and after purchase
Create options for improvement
Differentiation breakthroughs are less dependent on individual building blocks; it’s how they are combined that matters. Therefore, enhanced planning should consider how choices already made can be deployed, combined and incremented differently.
“Experimentation with no clear endgame is risky, so enhanced planning must be a priority,” says Cordin. “After all, it’s neither possible nor economically viable to strive for differentiation on every front, and new-growth efforts will depend on the continued health of a core business.”
Revisit combinatorial thinking
Combinatorial thinking thrives in many artistic and creative industries. You only need to look at the music, media and food industries to find examples of innovative thinking.
Differentiation will come about through deliberate combinations and patterns
“The desire to mix things up in the technology industry is also evident,” says Cordin. “Of course experimentation is necessary; however, just as in some instances fusion cuisine quickly became confusion cuisine, an irrational or disorganized dependency on innovation and experimentation is not a sustainable route for any provider.”
Move to deliberate patterns and combinations
The future of differentiation will come about through deliberate combinations and patterns that seek to improve on the current product success rate.
Perhaps you are looking to move beyond matching a market share leader and aiming instead to rival a leading market disruptor. Contrast your current differentiation approach with deliberate combinatory strategies that can help you reach your goal. To determine which combination of differentiators is best, identify the dependencies you need to reduce, maintain and increase over time.
Gartner clients can read more in “Emerging Provider Executive Insights: Effective Differentiation Demands 'Beyond the Product' Thinking” and “Tech Go-to-Market: Enhanced Differentiation Strategies Drive Product Success” by Ed Cordin.
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