Differentiation and neutralisation - The constant struggle

Last week, Geoffrey Moore published a post on LinkedIn called Innovation Silicon Valley Style is the Exception, Not the Rule. As always with Geoff, it is excellent and well worth the read. One of the things he highlights is the difference between disruptive innovation and sustaining innovation, playing up that the path has an impact on differentiation approaches.

While our research at Gartner consistently reveals that buyers struggle to understand the differentiation between providers, I've come to realise that, at least for some providers (a small set), differentiation is not critical. Geoff's post crystallised this for me.

If you are an established provider, preferably a mega vendor, then your goal is not to differentiate (in most cases). It is to neutralise others. Geoff uses Microsoft as his lead example, and it is a good one, but there can be many others.

What does it mean to neutralise? Effectively, it is to have a "good enough" product that diminishes the differentiation of others enough that buyers either don't embrace the differences or, frankly, don't feel they matter that much. When that happens, the most common choice buyers make–go with a known established provider. That is, go with the neutraliser.

This is an incredibly powerful asset for established vendors. But it requires discipline. Talented engineers often aren't excited about creating "neutralizing products."   Being the most innovative is cool, so there is a tendency to try to out innovate others–both in features and words.   For neutralizers, the better choice is "we are just as good, or almost as good, but – and more importantly for you, Mr. and Ms. Customer, we are lower risk and easier for you to manage." Effectively, the differentiation is not the product, it is the company and the established relationships (and risk reduction).

That storyline is not as appealing initially. Analysts, Bloggers, and the press may bemoan that lack of "newness." Others talk about it being a risky "catchup" effort. But momentum is an interesting thing. When you have the force of a large customer base and channel, once it gets moving, the impact is significant. The fast follower strategy is often a winning strategy. The key to success is choosing the right places and timing to follow.

This presents a challenge for the disruptive innovators. In order to establish a foothold, they have to create compelling differentiation.   Then, if they are successful and in a big enough market for the established vendors to care, they'll be attacked by neutralizers.  

Once that occurs, feature differentiation or "better product" differentiation won't work. Instead, it will be time to shift to other attributes - customer experience, focus, etc - to stand out. And, once you grow and are established, you may need to move to neutralisation approaches.

Netting it out. Differentiation matters, but neutralisation strategies may be the biggest threat that you will face (or biggest opportunity, depending on your place in the market).