How to Differentiate Your Startup in the Market

In the AI Gold Rush, the Real Gold Lies in Differentiation, Not Just Picks and Shovels During the California Gold Rush of the 1800s, the biggest fortunes were often made not by the miners, but by the entrepreneurs selling them picks, shovels, and supplies. Today, in the AI boom, selling the modern equivalents of picks and shovels—like high-powered hardware and AI development platforms—can be lucrative. The Modern-Day Picks and Shovels From manufacturers of hardware for AI model training and deployment, to platforms and tools for building AI solutions, to data annotation companies that curate and label the data fueling AI, all these players sell the modern-day equivalents of picks and shovels, empowering others to tap into the AI gold mine. The Need for Differentiation But being a "pick and shovel" seller in the AI rush isn't enough. You need to go beyond the basics to make lives easier for your customers in specialized ways that match your company’s strengths. To truly differentiate, consider these ideas: 1. Niche Solutions for Specific Areas: Focus on one industry or problem and become the go-to company for AI solutions in that space. For example, specialize in working with regulated industries like finance and healthcare and deliver both customized solutions and better performance metrics than the competition. 2. User-Friendly Design: Your product must adapt to how users work, not the other way around (hint: no prompt engineering gymnastics). Create AI tools so intuitive that even a newbie can use them without additional training. 3. Comprehensive Integrations: Provide out-of-the-box integrations with other tools and systems that your customers are already using, helping them seamlessly integrate AI into their workflows. 4. Data Governance and Security: Prioritize rock-solid data quality and security protocols, ensuring organizations' peace of mind regarding their sensitive data. Next time someone brings up the "picks and shovels" analogy in a meeting, challenge your team. Remind them it's necessary but not sufficient for long-term success. To really cash in, you need to bring something special to the table. Whether it's niche expertise, unparalleled usability, seamless integration, or bulletproof data governance, those unique differentiators will separate your solution from the rest of the market.

Let's be real. Most startups are a mess. Your first VP Sales needs to create order from chaos. So you can transition beyond founder-led sales. Here are 4 things you need to figure out quickly: 1. Competitor Analysis: Starting client interactions without knowing the landscape? That’s like cross-country driving before GPS. You’ll probably get lost. Understanding your position in the market isn't optional—it's your foundation. If you can't differentiate, you can't sell. Undifferentiated solutions race to the bottom on price. Unless you want to be the lowest-cost solution, you need to figure this out. 2. Unique Selling Points: You need to be hyper-clear on where you stand. What sets you apart? This isn’t just a “list” btw. It should be your team’s rallying cry. What hill are you going to die on? Embed this into the DNA of your sales team. This becomes the cornerstone of your value proposition. 3. Ideal Customer Profile: Precision here is non-negotiable. Knowing who you're for (and who you're not) sharpens your focus. Because opportunity cost is key. Focus on who you’re best for. Otherwise, you will spend lots of resources gaining no ground. 4. Buyer Personas: Get into the minds of those you serve. Understand their pains, dreams, and where they spend time. This is how you connect, truly connect, with your audience. If you don't solve a problem a decision maker cares about, you are relegated to longer deal cycles and lots of, "this isn't a priority," or "not right now" Remember, 90% of founders rely on gut feeling initially. That's a start, but not a strategy to scale with. The real challenge? Committing to these steps. Most might leave it to fate. But not you. That's why you need a VP Sales or fractional revenue leader who gets this. And knows how to turn this type of chaos into order. And document it into systems; that scale. Bonus Tip: Difficult clients drain 2-4x the resources of everyone else; avoid them at all costs. Turning down bad business will be the best decision you ever make. The impact on time, morale, resources, brand, and ultimately revenue, isn't worth it. 👋 If you liked this, give me a follow ♻️ Repost if this landed with you.

Differentiation – we all know we need it…yet most struggle to achieve it. To help sharpen your brand’s positioning and carve out a unique piece of the market, I put together this sheet with 6 models focused on differentiation. I’ve written longer posts about all of these but together they create a handy checklist on ways to create more separation from the competition. Here’s a quick TL;DR on each one: 1️⃣ Avoid positioning blur It’s easy (and very common) to skew too far into higher level benefits shared with competitors. Keep your focus specific to avoid rippling out and blurring together. 2️⃣ Build around the pillars If you ever lose sight of your unique value, come back to the fundamentals – who you serve (customers), where you separate (competition), and what you deliver (offering). 3️⃣ Find latent differentiation Leading with table stakes value might be pushing some of your brand’s highlight points out of sight – reprioritize and bubble them back up. 4️⃣ Know where you win Positioning isn’t about better or worse – it’s about difference and fit. Understand where your competitors win to draw contrast from them and show where you win. 5️⃣ Focus on separation Give your ICP a succinct way to understand and remember you. Focus on the 2-3 points where you provide the highest level of value with the most separation from competitors. 6️⃣ Match your maturity Market leaders have the luxury of brand equity which allows them to focus on broad, expected value. For startups it’s the opposite – emphasize differentiation above all else. Creating meaningful differentiation takes work...but in these wildly crowded markets it’s critical to survival. Spend some time checking your brand against these 6 models and you’ll hopefully spot some opportunities to sharpen that positioning knife and slice off a bigger piece of the market for your brand. 🔪🔥 #positioning #differentiation #competition

👉 Focus on Relevant Differentiation. Startups often ask, "How are we different from our competitors," when their customers simply won't care. In April Dunford's book, "Obviously Awesome" she explains that differentiators that matter are those that are relevant to the way your customers solve their problems today. So your direct competitors' products only matter if your potential customers are solving or are considering solving their problems with those products right now. I often see B2B software companies that serve small businesses struggle with this distinction. They position their product as a better, more feature-rich solution than other platforms, but their prospective customers aren't using other platforms. They are actually using manual processes and spreadsheets to paste together solutions to a problem. "Ditch the spreadsheets and make collaboration easy," may not be the best headline I've ever read, but if I am managing projects on Excel today, at least I know this company is talking to me! So, if you are workshopping your differentiators with your team I recommend focusing first on understanding how your customers are solving their problems today. Here are some questions that can help you get there: - Who gets value from our product today and why? - How did our customers solve this problem before they found our product? - Why is our solution significantly better than the way they used to solve this problem? Sean Ellis and I recently spoke with April Dunford on The Breakout Growth Podcast. If you are working to dial in your positioning or sales pitch the conversation is well worth a listen (link in comments). Hit me up if you have any questions.

In my work as a growth advisor, I have a lot of conversations with Founders. Their most common question: “What’s the marketing secret to scaling my startup?” The answer isn’t really a secret: Develop high-converting messaging. That is, messaging that is compelling to your target audience and differentiated from alternatives in your category. Extra points for having personality. Of course, this is much easier said than done. There are TONS of messaging frameworks out there. Some are too academic and hard to put into action. Others are superficial and lead to generic messaging that doesn't land with anyone. After years of tinkering, I’ve come to rely on a proven six step framework that we use for our clients at Lantern: 1. Build a Customer Persona 2. Construct the Benefit Ladder  3. Develop the Brand Pyramid 4. Anticipate the Barriers 5. Test with Target Consumers 6. Launch & Iterate Today’s post will cover the first step and over the next few weeks, I’ll lay out the others in enough detail that you can put this framework into action for your business. Step 1: Build an In-Depth Customer Persona The most important thing to do when marketing a startup is to ground yourself in your customer. This goes beyond “we're targeting millennials.” Instead, paint a complete picture of who you are speaking to. This allows you to craft resonant messaging that speaks directly to your customers' needs and beliefs. Consider: • Basic demographics: Age, gender, location, and income level. Who is this person on paper?  • Motivations: Your customer’s pain points and desired outcomes. What problems do they want to solve? • Awareness journey: How they discover your product. Where is the friction and points of delight? • Perceptions: Your customers beliefs about your category. What opinions do they already have? • Decision process: Their path to purchase. How do they research? Who is involved in their decision to buy?  • Ideal experience: The best case user interaction with your product. How can you deliver their dream scenario? Here’s an example of how this work informs marketing strategy: Both Signos and Sequence are weight management startups, targeting women in their 30s and 40s who want to lose weight. Yet they have totally different consumer personas based on different core insights. The Signos insight: many consumers want to be in control of their journey and don’t believe in easy solutions. They want to put in the work — they just need guidance on how to make their weight loss efforts more successful.  The Sequence insight: another segment of consumers have tried everything to lose weight and have given up. They feel stuck. They need a significant push to restart their weight loss journey. These are two companies in the same category with totally different consumers. These insights led my team to devise totally different messaging for each company. What are some other pieces that traditional "target consumer" frameworks miss? 

Trying to figure out what market your start up product is in? Best advice from learning the hard way: ask how the champions at your early customers describe and sell your product internally to their colleagues. Often times they’ll lean on something familiar to the non experts that will seem dumb to most founders at first but will be your future when you learn to embrace positioning meant for the mainstream. Most founders get into this business to innovate and hate to boil down what they’re doing to an existing technology or market cause it feels demeaning or simplistic. But the reality is, it’s the easiest way for people to understand your core value prop. Lean into it and figure out ways to bring your own style/design/culture to the game to show off and enhance your differentiation. As a bonus you’ll skip the ‘how do I price this thing’ game cause you can borrow from whatever you’re associated with at least as a starting point. Double bonus: the simplistic positioning will likely put you in the biggest adjacent market to your current product cause it’s the most familiar and well known to others. You might not be ready to take on that market… YET. But it might help you understand what your longer term roadmap looks like. Use this to determine how you’ll differentiate in that space early on while you build into the market positioning. I miss any nuggets Nick Galbreath? Cc Aviso Ventures

If people have barely ever heard of your startup, your messaging must lead with this critical attribute: Distinctiveness. Truth is, category leaders don’t need to start the conversation with their secret sauce. They’re already a chef’s favorite item inside people’s consideration menu. But you? The ‘revolutionary platform’ and ‘all-in-one’ claims plastered on your website aren’t going to cut it. Instead, focus on your edge: what makes you distinct? Maybe you only cater to one specific sub-segment of the market (e.g. product managers at early-stage SaaS). Or have a bold promise (“resolve up to 80% of customer support cases”). Or only tackle a very narrow set of jobs-to-be-done (e.g. track KPIs for suppliers like on-time delivery, product quality, and inquiry responsiveness to identify areas of improvement and ensure contractual compliance). Highlight, and then breakdown, your unique and easily identifiable components.

I'm sure you have heard the phrase "Go Big or Go Home!" The intoxicating allure of large market opportunities is hard to resist. However, the most common pitfall for young companies is trying to be all things to all people, only to end up being nothing to no one. Starting small is not synonymous with thinking small. It means zeroing in on a segment within a larger market where you can offer unique value. This not only helps in achieving quicker profitability but also allows for the accumulation of invaluable experience. This initial foothold then becomes your stepping stone for strategic expansion into adjacent markets. Avoiding the temptation to capture a larger market prematurely is an immense challenge for startups. While the entrepreneurial spirit is inherently adventurous, discipline is essential to give your venture direction and purpose. Focus helps you build depth instead of breadth, and it's in that depth where you’ll find your differentiation and build brand loyalty. Here is some examples: 1. Amazon: Today it’s a global marketplace, but Amazon started as an online bookstore. Jeff Bezos chose books as his initial offering because they were simple to ship and offered a wide range of titles. Mastering this niche gave Amazon the resources and credibility to diversify into other categories. 2. Facebook: Now a universal social networking platform, Facebook began as an exclusive service for Harvard students. By focusing on a specific problem for a specific audience, Mark Zuckerberg had the time and space to refine the product, setting the stage for its broader application. 3. Airbnb: What began as a simple idea to rent out an air mattress in a San Francisco apartment during a conference has now revolutionized the travel industry. Initially, Airbnb served a very niche market of travelers looking for a homely experience at an affordable price. Once they nailed this, they expanded their offerings to include everything from unique homes to experiences hosted by locals. The success stories above didn't start by taking a scattergun approach to market dominance. They won by being exceptional in a specific, focused arena first, mastering it, and then methodically expanding. Here's why this works: - Fast Profitability: Operating in a niche market means less competition and quicker paths to profitability, providing the necessary capital for future expansion.    - Word-of-Mouth: When you’re remarkable in a smaller community, your satisfied customers become your brand evangelists.    - Learning Curve: It’s better to make inevitable mistakes in a smaller sandbox where the risks are manageable and the lessons invaluable. While the glitter of a large market is tempting, the discipline of focusing on a smaller, more targeted market could be the making of your company. After all, "The riches are in the niches." #Entrepreneurship #StartupStrategy #NicheMarketing #BusinessGrowth

Rule No.1 in #startup and #business: Sell the solution to a problem, not the product you built. 🔍 Why Selling the Solution Matters: Customer-Centric Focus: By understanding and catering to your audience's pain points, you're not just selling a product – you're providing a tailored solution that adds value to their lives. Market Relevance: Markets are saturated with products. Differentiating yourself by offering a solution to a pressing problem increases your relevance and market standing. Emotional Connection: Solving a problem creates a powerful emotional connection with your customers. It demonstrates that you genuinely care about their needs. 🛠️ Correct Approaches to Building a Software Product: Identify Pain Points: Conduct thorough market research to identify pain points your target audience is facing. This forms the foundation of your solution-driven approach. Create #User Personas: Craft detailed user personas to understand the motivations, challenges, and preferences of your potential users. #ProblemValidation: Validate the problem's severity by engaging with your audience. Their feedback guides your product's direction. The more severe the problem, the more you should focus on the features that solve it. #Iterative Development: Adopt an iterative approach. Build a #MinimumViableProduct (#MVP), gather feedback, and continuously refine your solution. Feature Prioritization: Prioritize features based on their impact in solving the identified problem according to their level of severity. Avoid building unnecessary bells and whistles. #UserCentric Design: #UX matters. Design your product with the user's journey and usability in mind. Educate and Empower: Showcase how your solution addresses the problem effectively. Provide educational content to empower users. Feedback Loop: Maintain an ongoing feedback loop with users. Their insights help you adapt and improve your solution over time. Remember, in the realm of startups, it's not about the bells and whistles; it's about delivering real value through your solution. Focus on the problem, and your product will naturally shine. #StartupWisdom #ProblemSolver #ProductDevelopment #Entrepreneurship

Most startups make this mistake with their messaging… Describing your differentiation should rarely be about how your product is different from competitors' products. Instead, differentiation should be about how the new way of doing things is different from the old way of doing things. Your product is just a tool to help your customers succeed with the new way of doing things. Some examples: Drift differentiated website chat (the new way) from website forms (the old way). Asana differentiated “teamwork without email” (the new way) from “teamwork with email” (the old way). Salesforce’s “No software” campaign differentiated cloud computing (the new way) from on-prem software (the old way). When you differentiate against competitors you set yourself up for a feature battle. (Which no one wins.) When you differentiate against the old way of doing things you set yourself up to be the only logical solution. Choose to be the only logical solution. #positioning #differentiation #startupmarketing #b2bmarketing