At the core to any strategy, is differentiation. There are two ways a company makes a desired profit: (1) by performing a task considered valuable to its customer base & (2) by being considered different from ones competitors in a manner that is appreciated by that base.

STARTING POINTS:  Differentiation Flow Diagram

Historic diagnosing evaluations of past successes/failures, are not much fun but it is an exercise, properly addressed, that can make a great deal of sense in building a differentiation model.

Take the past 5-10 (the more the better) growth investments and ascertain what they have in common. Determine your most important differentiators in these growth initiatives by screening your judgments through these sets of fundamental questions:
• Are they truly distinctive?
• Are they measurable (quantifiable) vs. competitors?
• Are they pertinent to your core customer deliverable?
• Are they mutually reinforce able?
• Are they obvious to all levels of the organization?

Once this very difficult process is complete and thoroughly tested at all levels of the company, one has a formula for focusing on innovation. Innovation in this case refers to the complete spectrum of business activity . . . not just technical innovation.

Additionally, it is very important not only to recognize your differentiation but also to test the sources of competitive innovation and its potential affect on your key differentia table position. Experience indicates that when  your position is strong and has a defensible position, even disruptive innovations will affect only one part of a business model. 

Replicating successful differentiation models is a key and time-consuming tactic to successful strategic positioning.  Markets are changing faster than ever experienced in the past. For example, coatings and adhesives designed for rigid packaging (metal cans, etc.) must change dramatically when a rigid package loses to a flexible packaging design. Those formulators (and suppliers to formulators) who supplied an interior coating for a beer/beverage can may lose business if it cannot bring a new coating/adhesive system to the flexible beer pouch in this transfer dynamic. Equally important is being able to keep up with the flexible packaging design change frequency versus the very slow-to-change rigid packaging changes.

Therefore, to be a successful market differentiator, constant and rapid change in your markets must be accompanied by swift learning and adjustment.