Companies everywhere are struggling to differentiate their offerings. They dream of establishing an unassailable market position for their solutions, a position that will enable them to capture a lion's share of the customer's mind and wallet.

But, to their frustration, no matter how enticingly and expertly their portraits of the solutions are painted, to customers their solutions and their competitor's solutions usually end up looking amazingly alike. Painstakingly executed solution differentiation strategies end up becoming one-way tickets to the Value Gap and painful dry-run, no-sale scenarios.

Twenty years ago, Theodore Levitt declared: "The search for meaningful distinction is a central part of the marketing effort. If marketing is about anything, it is about achieving customer-getting distinction by differentiating what you do and how you operate [italics added]. All else is derivative of that and only that."¹

Sellers en masse have subscribed to Levitt's view. They first focused on the most obvious element of his distinction formula and attempted to differentiate based on the "what you do" part of the equation. They developed and marketed longer and even more esoteric lists of solution features. They also created ever more complex bundles of products and services.

This focus on solution benefits was legitimate, but two things occurred that eventually rendered it ineffective.

First, the competition quickly imitated the features that proved popular with customers and the distinction between solutions disappeared.

Second, a race to add features ensued, and soon feature-based distinctions exceeded customer requirements and saturation points. When customers cannot use or recognize benefits, differentiation schemes that depend on them become meaningless.

Always in pursuit of differentiation, companies turned the focus of their differentiation efforts on the "how you operate" part of Levitt's formula for "customer-getting distinction."

At its highest level, "how you operate" is represented by the business model on which your company is built. In 1996, Adrian Slywotzky, now a Managing Director at Mercer Management Consulting, published a compelling exploration of the power of business model innovation. In Value Migration, Slywotzky traced the explosive growth of companies such as Nucor, Microsoft, and EDS to their ability to create and operate new kinds of business designs that more effectively delivered value to their customers.

Nucor, for instance, was able to win a leadership position in the hidebound steel industry by building highly efficient mini-mills that were capable of converting scrap into bar and rolled steel. In the late 1990s, the promise and potential of business model innovation also became one of the primary drivers in the rush to e-commerce. These are all examples of what Slywotzky called "a pattern of accelerating Value Migration away from increasingly outmoded business designs toward others that are better designed to maximize utility for customers and profit for the companies."²

New business models, if properly connected on customer problems, can be a rich source of profit. The ability to create a distinctive position in the customer's mind using the new business model is usually a longer-lived advantage than a features-based distinction. But, eventually, business design-based differentiation is subject to the same problems as feature-based differentiation. Competitors adopt a similar value-delivery model (which they certainly will whenever a successful one is discovered), and its differentiation power fades.

By the way, your competitor doesn't have to be fully capable of delivery of the new model; they only have to verbalize that capability in order to disrupt your differential advantage. If competitors are not content to just "me too" your capability, a race for new business designs ensues—and, again, we risk outrunning both our customers' needs and their comprehension levels.