Most tech entrepreneurs get lost in the logistical plans for their businesses. You’re worried about the timetables and deadlines for your developers or how you’re going to stretch your initial capital investment to last a full six months. These are important considerations, especially for AI and IoT startups tinkering with revolutionary new technologies. However, even the best-planned tech companies from a logistical perspective can still fail if they haven’t differentiated themselves from their competitors.
The Importance of Differentiation
Differentiation is important for tech companies for several reasons:
- Attention. From day one, part of your success as a tech startup entrepreneur will depend on your ability to generate attention for yourself. Are investors clamoring to hear what you have to say? Are early adopters eager to see what you have to offer? Can you stand out at tradeshows and attract flocks of attendees? People are attracted to novelty, especially when they’re used to seeing the same types of things over and over. If your business is distinct in some critical way, they’ll be far more likely to notice you.
- Visibility. Differentiation is also important for your early-stage marketing and advertising strategies. Customers may not be interested in your profitability model, but they’ll definitely be interested to know why they should choose you over a competitor. Having some sticking point that sets you apart from the competition will encourage more customers to give you a try—and can help you generate press so you can reach even more people over the long term.
- Memorability. Investors aren’t inclined to remember every business proposal they read, and customers often have a hard time remembering what the brand was in the commercial they just watched. But having some key feature to set you apart from competitors will instantly make you more memorable; you aren’t just another tech company making a cash grab.
- Competition elimination. Differentiation forces you to take a different approach than your competitors in some key way. Inevitably, that allows you to eliminate (or mitigate) at least some of your competition altogether. For example, if you’re both targeting entirely different demographics, you may not have to worry about getting in each other’s way at all, or worry about poaching customers. In most scenarios, there’s a Venn diagram with overlapping targets from both competitors, but you should still have part of a niche all your own.
- Identity. Finding a way to differentiate yourself may also hold the key to establishing your brand identity. If you’re struggling to define the startup in some way beyond the technology it produces, this could be your chance to do some soul searching and land on a characteristic or strategy you want at the center of your entire business. That can fuel an entire network of recruiting, marketing, advertising, and sales strategies.
So how can tech companies differentiate themselves?
Core Business Model
The most obvious and most powerful way to differentiate your business is to come up with a core business model that’s radically different from those of your competitors. Obviously, this is easier said than done.
Some tech companies will originate with the intention of disruption—bringing an entirely new product, service, or approach to a would-be saturated field. If your idea is fundamentally original, you’ll be instantly differentiated, and you’ll see all the benefits listed above naturally.
However, there are two problems with relying on this approach. First, coming up with a brand-new idea is ridiculously tough, and it’s almost impossible to do intentionally. Second, even if you’re one of the rare entrepreneurs capable of generating a new idea from scratch, it’s only a matter of time before competition arises—and at that point, you’ll need to find a new way to differentiate the business.
Price and Quality
You could play with factors related to price and quality as your mode of differentiation. The simplest example here is to offer what your competitors are already offering, but cheaper. If an app typically goes for $5 and you can sell yours for $3, or offer it for free while generating revenue from ads, you’ll have an immediate advantage. You could also go the other direction; many users will be more than willing to pay extra money for a tech product or service that’s built with better materials, or one that offers significantly better performance.
Unfortunately, you won’t always have strong control over costs, and the balance is easy to get wrong. It may not be wise to rely on this as your exclusive mode of differentiation.
Target Demographics and Niche
You could also change how your business operates by altering your target demographics, or your business’s niche. For example, if your top competitor makes money by targeting middle-aged people, you could consider taking the model and adjusting it to target teens and young adults. You could also attempt to brand yourself as occupying a different niche.
This can be challenging to pull off if your target demographics will make or break the business model, or if there are already competitors crawling over every conceivable niche.
Branding and Image
There’s a lot you can learn from your competition, including which brand personalities are already accounted for in your industry. Sometimes, all it takes is a new vision for a brand identity, like a different tone or different personality, to differentiate a company and reach a new audience. For example, if most of the tech companies in this space bill themselves as strictly professional and businesslike, you could shake things up by branding yourself as more easygoing and casual. If your top competitors play it loud with aggressive advertising, you could take a subtler approach.
This is another difficult balancing act; if the majority of competitors in your industry have similar brand values and personalities, it’s probably for a reason. Differentiating yourself too far could alienate you from your target demographics.
The quality and type of customer service you offer can differentiate your tech company as well, especially if your competitors are lacking in this area. Do some research to evaluate the customer satisfaction levels of your top competing companies, and try to learn what those customers specifically don’t like. Do they feel like they aren’t getting the help they want? Do they wish they had more communication channel options?
This is one of the easiest modes of differentiation to accomplish, but it does require an investment, and depending on the nature of your industry, it can be hard to scale.
Thought leadership, or the process and strategy of coming up with new ideas, creating expert content, and building your brand’s authority, is important for almost every business, regardless of how you’ve differentiated yourself in other ways. But for tech companies, it’s an exceptionally strong opportunity to set yourself apart. By creating a more charismatic front-person (usually a CEO), publishing more original content, and expressing strong opinions (even if they’re slightly controversial), you can make a name for yourself and separate yourself from your competitors.
There’s also room for brand differentiation if and when you decide to expand your company. Most tech companies have a plan to scale, at least somewhat, including offering a wider range of products and services, opening new physical locations, or targeting new demographics. All of these areas give you more potential for defining your brand standards and deviating from industry norms. For example, if the majority of your competitors are focused on urban populations, you could target more suburban or rural locations. If you’re interested in building out a wider line of products for your customers, why not create or adopt some unconventional choices?
Founding a tech company is always a challenge, but you’ll gain significant advantages over your competition once you find a strategic way to differentiate your enterprise. The question is, which dimension of differentiation is most advantageous for your brand and your target demographics? And do you have enough wiggle room to update your approach in the future? You’ll need to find the answers to these questions if you want to succeed, even if your tech is solid.