Competitive differentiators are the beneficial and unique aspects of your product or service compared to those of competitors. These qualities may provide benefits to consumers, such as a useful and unique feature, more reliable operation, or lower price; or may provide benefits to your organization, such as reducing manufacturing or operational costs. A competitive differentiator may be the functional and technical capabilities of your product or service that make you superior to consumers over your competition. In one sense, your competitive differentiators are your “secret sauce” or your organization’s reason for existing: they’re why customers should come to you rather than someone else. In this next post in our Startup Intellectual Property (IP) Series, we will explore why identifying and protecting your competitive differentiators is a key IP consideration for startups.
When we meet with new startups or emerging technical companies and ask them to describe their competitive differentiators, their answers often fall short of providing a specifically defined competitive differentiator that ties into the technical capability or functionality of their product or service. Many such companies describe their competitive differentiators simply by high level results or vague statements that their product or service is faster, better or easier to use. But, just as every company has a reason for existing, every company has similar high level claims, including the competitors and unrelated companies. So is this then really a competitive differentiator?
For technology based companies, the key to identifying your true competitive differentiators is to ask yourself, “what are the functional and technical capabilities of my product or service that enables it to be faster, better, or easier to use?” Is there a technical or functional feature of your product or service that the competition does not do that provides the results that you tout? If you are not just a “me too” company that copied the technology or functionality of your competitors, what specifically did you implement differently? Those functional and technical aspects of your product or service are your true and tangible competitive differentiators. Identification of these elements will improve your company’s story of differentiating its product and services by allowing you to confidentially and explicitly describe those differences. Investors, partners, advisors and potential customers will be more impressed with specific tangible competitive differentiators that are tied or built into your product or service.
Also once identified, the company can take steps to determine protectable intellectual property related to such differentiators. Many companies again struggle with this determination: when asked if they have any intellectual property, many will answer no or that they do not think so. But in the same breath, they will say they are a first mover or the only company to implement certain functional capabilities of its product or service and are not a “me too” company. Which one is it? Unless your sole distinctions from your competitor are location or capital, what makes you new and innovative will be a result of underlying intellectual property.
Your intellectual property can be protected by several different methods, including contracts, trade secrets, trademarks, copyrights, and patents. Each tool has its own advantages and benefits, and can be used alone or in combination to provide overlapping protection and exploit each of those advantages.
It is important to work with advisors who are not only technology savvy, but also understand business operations and can recognize valuable competitive differentiators of the company that are worthy of protection. By highlighting such differentiators as tangible, specific, and protectable, your corporate story is strengthened and validated to investors, partners, advisors and potential customers.