Radical Differentiated Value

It’s never been easier to launch a brand, product, or offer — an “idea”.

That dynamic is axiomatic.

In days gone by the cost of market access was high and the level of competition was relatively low.

If you could get your product to market, you stood a pretty decent chance of commercial success if it offered perceived differentiated value. Even if it was incremental.

Now, we find ourselves in a reverse state of reality.

Shipping a product to market is relatively easy and the level of competition is extreme.

I’m not just talking about direct competition either. Like… if your product is a SaaS fitness app and your direct competition is other SaaS fitness apps.

The competition in your category or adjacent categories is just one battleground.

I’m talking about competing for the attention of the mind. Getting inside there, understood, and valued in the first place.

This is where the real competition is.

And, it’s only getting harder.

How so?

Positioning pioneers Al Ries and Jack Trout declared an “assault on the mind”…. back in the 70s.

They characterised a tipping point in human civilisation in which there were “too many companies, too many products, and too much marketing noise” competing for the attention of the mind.

People were overwhelmed with choice.

So much so the only defence for the mind was to block 99.9% of it out.

The evidence they pointed to was the mid-20th century’s hockey-stick-like growth of advertising and media across TV, radio, OOH (out-of-home) ads, newspapers, books, etc.

More specifically, how ineffective all of these mediums had become for companies marketing their products.

What messages did reach their intended target audience mostly bounced off the mind and didn’t stick.

Why?

There was too much data for the mind to process. Certainly far beyond its ability to make efficient decisions.

Only a minority of ideas conceived by companies broke through and became valuably positioned, by leveraging how the mind categorises usefulness.

That was 50 years ago. 👀

As in… pre-globalisation, pre-Internet, pre-email, pre-gaming, pre-cloud, pre-smartphones, pre-apps, pre-social media, pre-podcasts, pre-instant messaging, pre-AI, pre-many things that attack our minds every single day.

By comparison, we now live in an “ultra-communicated” society.

How so?

Take a B2C category like American whiskey. In the 1970s there were a handful of whiskey distilleries in the United States. In the year 2000, there were around 70. Today there are over 2,300, all of which have multiple brands.

The same is true in B2B. In the 1970s ‘marketing technology’ didn’t really exist. By the year 2000, there were around 100 options. Today, there are 11,000+ options.

Our minds, in defence, block practically all of this out. The data defence filter has been turned up to 11.

What’s next, then? 

More of the same.

This communication explosion is accelerating exponentially.

To the degree it is perceptibly noticeable.

You can feel the difference between 10… 5… even 2 years ago.

The bar to break through and position a new idea in the mind has increased.

New, more radical, approaches are required.

🤑 Radical Differentiated Value

Today, startups and challenger brands have a tough time positioning themselves as “different” in a way that achieves scaleable commercial results.

They’re often up against other ideas, priorities, and mental insecurities that are perceived to be much more pressing.

Differentiation claims are often perceived as incremental by target customers (even though the company making the claims may consider otherwise).

Unfortunately, incremental differentiation doesn’t deliver the critical outcome that all ambitious companies want: hypergrowth.

At best it delivers incremental growth. At worst, nothing.

Why?

The mind is stimulated by radical differentiation, not incremental.

It rarely notices incremental differentiation at all — akin to the “Change Blindness” effect.

Interestingly, this is the opposite of conscious perception. People think they notice incremental change. This often contributes to a mismatch between the designed value a company offers and the perception of the value it offers.

Even if a new brand or product punches through “Change Blindness”, incremental differentiation is seldom enough incentive for prospects to seriously evaluate and adopt it. Not enough to switch. Not enough to care.

There’s too much uncertainty, too much cognitive friction, not enough distinctiveness, and not enough perceived value.

I call this dynamic Incremental Differentiated Value.

To punch through and achieve sustainable hypergrowth, differentiation can’t be meek or weak.

It can’t be incremental.

It needs to hit like a sledgehammer to the mind.

So the value can’t be ignored.

Breakout companies and brands do this masterfully — paragon examples include Apple and Salesforce.

Whilst they are massive companies far removed from the relatability of a startup or challenger brand, the same principle applies no matter what stage you are at.

Differentiation has to be radical to stand out. Pattern-interrupting. Shocking.

I call this approach Radical Differentiated Value.

How does it work?

Like any journey, where you start dictates your approach to navigating somewhere valuable.

The same is true with positioning strategy.

The only major obstacle between no growth and growth is perceived differentiated value.

This is the delta in perceived differentiated value between competing solutions and a proposed solution. The greater the perceived differentiated value, the greater the growth potential.

What’s “perceived differentiated value”? The unique value a solution provides relative to competing options in the mind of the prospect.

Most value propositions are either indistinguishably differentiated or incrementally differentiated.

Indistinguishably differentiated value propositions primarily grow as a result of referrals and reviews. They are functionally undifferentiated. For example, you may choose a law firm because a friend recommended them. They are differentiated because they were recommended by a friend, and little else.

Incrementally differentiated value propositions primarily grow as a result of a unique feature or benefit-unlocking theme that delivers incremental perceived value. For example, you may choose a law firm because they have an app where you can track the progress of your case remotely.

In many scenarios, both of these dynamics are tenable because most companies are happy to grow incrementally. They are not seeking hypergrowth.

However, neither of these dynamics works for companies and brands seeking hypergrowth. To do that, they need to establish a perception of radical differentiated value in the minds of their prospects. This is a huge mental difference. A different league to play in.

The bar for radical differentiated value is several orders of mental magnitude higher than incremental differentiated value.

Why? The objective is to ‘shock’ the prospect. To be pattern interrupting. To make the proposition a priority. To create a sense of urgency. To overcome switching costs. To overcome the fear of failure. To adopt it mentally.

Radical differentiated value is the essence of what it means to have “product-market fit”.

No radical differentiated value = no product-market fit.

No product-market fit = no hypergrowth.

Why is it so hard?

Many startups start off in the same direction as everybody else (without consciously realising it). Their frame of reference is so engrained as an assumed perception that its automatic to do so.

This path leads to radical value: valuable, not different. For example, if Airbnb had set out to make “a better hotel” instead of “airbed and breakfast”.

Conversely, other startups start off in a direction not identifying and accepting the mental positions and perceptions of categories and competitive alternatives that are already present in the minds of prospects.

This path can lead to radical differentiation: different, not valuable. For example, the Segway (sure its fun, but walking is easier).

It’s easy to be radically differentiated or to provide radical value, but it’s real hard to do both.

What’s the starting point to achieve radical differentiated value, then?

It depends.

Often, it involves overturning elementary assumptions being made by the players in a category or adjacent categories — the tacit rules of engagement.

To do this requires divergent thinking, a contrarian perspective, and focus.

Let’s start with a hypothetical example, using the classic “better mousetrap” analogy. 👇

🪤 “Better Mousetrap”

Let’s set the scene.

You’ve just founded a startup to help homeowners resolve a specific problem: mice infestations.

So, you look at the solution homeowners are currently using and decide to use that as a starting point — mousetraps.

After extensive market research, you conclude existing mousetraps have a bunch of weaknesses.

By astonishing coincidence, a new technology has become available. It’s now feasible to build better-performing mousetraps.

So, you go about building a better mousetrap.

“Mousetrap 2.0”

It’s gonna disrupt the mousetrap market, you think.

But, there’s a problem.

If you start out to create a better mouse trap. That’s what you’re gonna get. A better mousetrap.

Prospects will view it as a mousetrap. Because… it is.

Your “Mousetrap 2.0” may be cheaper, it may be more efficient, it may look different, or it may be more humane or environmentally friendly.

Whatever it does better, the idea is likely going to be perceived as incremental.

Why? Because it’s a mousetrap.

The prospect already has an established set of perceptions about what a “mousetrap” is and how it functions.

“Mousetrap 2.0” is positioned within this limited perceptional boundary.

It is not perceived to be particularly novel and worthy of consideration when the prospect already has a preferred option… “Mousetrap 1.0”.

Why?

This existing option “does the job” and there are more important things to occupy the mind over “Mousetrap 2.0” — nutrition, money, health, career, relationships, etc, etc.

Consequently, “Mousetrap 2.0” is ignored by the mind.

This is deeply frustrating when you can see how much better it is.

It bites the dust cheese.

Snap.

💸 “Moneytrap”

What if, instead of a mousetrap, you started from a different position?

A radically different perception to expunge mice from households.

Like what?

You could start with people who actually want mice.

Maybe they want them for experiments. Or maybe for some kind of hobby or something. Who knows. It’s hypothetical.

Then ask the question, do these people buy mice?

If so, could you sell these people the mice you catch?

If yes, instead of charging householders to buy “Mousetrap 2.0”, you could provide catching devices to homeowners for free. Let’s call this invention “Freetrap”.

These catching devices are paid for by the mice buyers. You pocket the difference between the “Freetrap” device cost and mouse revenue.

Consequently, you now have a two-sided marketplace. Homeowners and mouse buyers.

That’s pretty different.

But… do “Freetraps” present Radical Differentiated Value to the homeowner?

Probably not. The radical bar is high.

“Freetraps” are still in the zone of Incremental Differentiated Value. 

How so?

Mousetraps are relatively inexpensive and the homeowner is comfortable with using them.

Meanwhile “Freetraps” introduce uncertainty. The mind feels insecure with little perceived upside for the sake of saving a few bucks.

After extensive customer testing, your assumption proves to be true.

Dang.

So, you revisit your starting position.

That is… the mouse buyers paying you money for mice.

As it turns out, they have an insatiable appetite for furry little critters. They can’t get enough of them. Demand outstrips supply.

Meanwhile, the other party in your two-sided marketplace, homeowners, are a little bit strapped for cash.

Money is constantly on their mind. Mice, and the relative ease of mouse catching, not so much.

Boom. That’s it.

The Radical Differentiated Value is to pay homeowners for their mice. By splitting the mouse buyer revenue with them.

This aligns with homeowners’ key priorities (making money) and it’s radically different from what they were doing before. It’s novel and noticeable — getting paid to solve a problem they once paid for.

It isn’t a “mousetrap” or a “freetrap” anymore.

It’s a “moneytrap” — that’s the ‘category’ name.

The mind can’t ignore it.

Hypothetically.

But, that’s just it. This is purely hypothetical.

So, what are real-world examples?

Let’s take a look at one B2B example and one B2C example.

B2B: Outbrain and Taboola

We’re all familiar with ‘content recommendations’. Those attention-grabbing content thumbnails that sit at the bottom of webpages on news sites, blogs, etc.

Mostly, they are algorithmically generated by Outbrain or Taboola integrations — the main players in the sponsored content recommendation category.

Screengrab of an Outbrain widget👇

Before Outbrain and Taboola came along, publishers used to pay for specialised software (or built it internally) to generate the content recommendations they needed to boost pageviews/revenue.

An incremental way to differentiate in that market dynamic would be to make that paid software cheaper, better performing, format-specific, etc.

But, that’s not the position Outbrain started from.

They started from the position of consumers (readers). By asking the question: “Would advertisers pay to reach their prospects in content recommendations?”

That answer turned out to be a big “yes”.

From that discovery, Outbrain (and then Taboola on its heels) built the perception of Radical Differentiated Value for a new idea and category: sponsored content recommendations.

How so?

Similar to mice buyers and homeowners, they spilt the buyer revenue (advertisers) with suppliers (publishers).

Before, publishers were paying to generate content recommendations on their media properties. Now, they were getting paid.

This idea is radically different and aligns with the perceived priorities of the target customers’ mind: increasing revenue.

Taboola is publicly listed and (as of writing this) has a market cap of $1bn.

B2C: Zilch

The BNPL (buy now, pay layer) category was crowded when Zilch launched in 2020.

The competitive landscape they faced had big established players like Klarna, Affirm, and Afterpay and a ton of ‘me too’ competitors with weak positioning ideas built on Incremental Differentiated Value claims.

Breaking through this noise with Radical Differentiated Value was critical.

That’s exactly what Zilch did.

How so?

By starting from a different position.

Existing industry players like Klarna and Clearpay started from the position of retailers.

Their focus was B2B-centric, working directly with retailers to increase average checkout value and conversion rates (revenue).

This model came with trade-offs for the end consumer (shopper): financing costs and fragmented administration.

Conversely, Zilch started from the position of consumers. Their focus was B2C-centric.

By changing who the customer focus was, they were able to build a perception of Radical Differentiated Value with that target customer. 

How so?

Zilch made it free to borrow money to make purchases from 5,000+ retailers. Zero interest and zero fees, so long as it was paid within six weeks.

Instead of charging customers for borrowing money, Zilch charged retailers affiliate commissions for access to customers — turning the model completely upside down.

They also generated revenue from interchange fees by utilising the MasterCard network as a payment method.

This meant customers could pay with Zilch wherever MasterCard was accepted. And, manage their repayments through a singular Zilch app — making debt management relatively easy.

Before, consumers were paying interest and fees to ‘buy now and pay later’. Now, they were paying zero.

This idea is radically different and aligns with the perceived priorities of the target customers’ mind: saving money.

Zilch launched in 2020. In 2021, they hit a $2bn+ valuation.

📘 Playbook

🧠 Mindset

• Acknowledge the ease of market entry, paired with extreme competition for attention.

• Acknowledge you are competing for the mind, not the market.

🤷‍♀️ Incremental Differentiation

• Recognise that incremental differentiation often goes unnoticed.

• Perceived value might differ from designed value.

• Avoid getting trapped in limiting perceptions.

💥 Radical Differentiation

• Challenge foundational beliefs and assumptions.

• Question and test: from which starting position drives the most value?

• Evaluate if the radical differentiation aligns with your customer’s key priorities.

🛠 Actions 

• Analyse the current value perception of your idea (category, brand, product). Is it radical or incremental?

• Brainstorm radically different approaches, by starting from different positions.

• Test these new approaches with target customers.

• Tweak your model based on feedback, ensuring alignment with consumer priorities.

• Launch with a focussed message highlighting the radical differentiation.

• Continually evaluate and adapt, ensuring your strategy remains radically differentiated.

Remember: Radical differentiation isn't just about being different; it's about aligning that difference with consumer needs, desires, and perceptions.

That’s it for today! I’ll be back in your inbox soon.

Martin 👋

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