If you’re like many business leaders right now, you’re in the heat of planning for the upcoming year. Hopefully, the plans are connecting to a longer-term business strategy your company is focused on. So, when you’re thinking about strategy you should be thinking about how do I differentiate my company from my competitors? You can also ask, what is my unique position in the market that will make me different than my competitors? I often use these two questions when talking to leaders about their strategy and their answers are telling. Most will tell me what differentiates their company from direct competitors is some operational efficiency. They think this is their strategic differentiator. Unfortunately, operational efficiency is usually not a winning business strategy, competitors can copy you easily.

A true differentiator is one that separates your company in the market. I am not talking about marketing (how you tell your company story to potential customers) I am talking about your market. The market of potential users of your product or service in the area you offer them. In your industry the customers in your market have needs. Those customers decide who they are going to use based on which company can satisfy their needs the best.

I recently read an article stating a differentiator is pricing. Pricing can be a differentiator, but it can also be an operational efficiency. There are many articles and examples of differentiators that can also be operational efficiency, but you must be careful. For example, if you are using pricing as a differentiator to respond to market pressure for pricing you could be in a losing game. If you’re thinking, “Why do you care if it gives you an advantage?” here’s something to consider. An operational efficiency can improve your top line but often over time it does not improve your bottom line. Why? Because operational efficiency is easy for your competitors to copy. You must be willing to move into a truly separate space from your competitors. The hard part of moving into the space your competitors aren’t operating in is believing in what your market analytics are telling you.

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