Differentiation and Colorful Fungi

I have finally found out the great benefit of a cold and rainy August – mushrooms.  I was walking through the woods the other day and was treated to a brilliant display of fungus.  What was most eye-catching, though, were the incredible colors of the bright red, yellow, and purple orbs scattered about the forest. It’s really amazing how different one type is from the next.  This differentiation in appearance is astonishing, and in stark contrast to the situation in many life science markets.  From automated workstations to protein Z, products (and services) are usually far more alike than they are different.

This sameness causes many challenges to arise in the market both for producers as well as end users of these offerings.  Here are some of the problems caused by a lack of differentiation.

• Competition is inherently increased due to the overlap in features and messages about the value.  Coupled with the finite number of opportunities, the battle to win customers is fierce.

• Profitability goes down as the value propositions become more similar – many fall back to price as a differentiator

• When products are very similar to each other, the purchaser must spend additional time and effort sorting out the differences that matter to them.  Thus, purchasing becomes more complex, and sales cycles get longer.  As an example, there are over thirty different microarray scanners available from a dozen companies.  Needless to say it will take some time to decide which one to actually purchase.

• Ultimately your product may not even get a chance to reach customers since its value is already being supplied to the marketplace.  Just look at the recent case of Merck’s cholesterol drug Vytorin where their press release earlier this year stated, “…there was no significant difference between treatment with ezetimibe/simvastatin [Vytorin] and simvastatin [current product] alone on the pre-specified primary endpoint…”  This public affirmation of the lack of differentiation will cost Merck about $700M in sales.

A differentiated product is a valuable thing since it usually leads to higher margins, faster adoption, higher market share, and shorter selling cycles.  So why is it so uncommon and how does one achieve the coveted position of a unique product?  Here are some ideas.

• It must first be established that the product provides a good deal of value to the purchaser, and that it does indeed solve a problem that matters to the target customers.

• Next an honest assessment of the current offerings needs to take place.  Though a high level view is quick to establish, open discussions with the target customers are critical to determine the values being supplied.  Use your favorite visualization approach and map out the space covered by the various offerings.

• Look at your product values in the context of the competition.  If you are supplying value in an uninhabited space (white or green) – congratulations.  If you are on top of or overlap with several other products you need to make some decisions.

• If you product is already in the market, but struggling due to lack of differentiation, it could be moved to a less cluttered segment.  Just look at how nicely the chromatic fungi all get along.  The red ones are near the gravel, yellow ones in the mossy area, and the purple ones in the dry leaves- a nice arrangement where all can flourish without running in to each other.

• Some other options are to add or remove features (or services) to increase differentiation, partner with a competitor and combine the offerings so both can benefit, or lastly – obsolete the product and quit before you lose a lot of money.  None of these solutions are cheap or easy, but the alternative is to slug it out with similar products.

So strive to be the red product in the midst of the yellow and purple – find a unique position of value which will lead to higher profits, faster adoption and higher market share.