Very often engineering types can only think of differentiation in technical terms. I think I can say that, in practice, at least in mature markets, differentiation is more about positioning and marketing rather than almost anything else. Easy examples:

- Cars
- Bottled water
- Computer monitors

The vast majority of automobiles produced today have reached a level of design and manufacturing maturity that makes them pretty much equally reliable and equivalent. The days of a Porsche or BMW being markedly better than a Toyota or Nissan are gone. Sure, we can point at the extremes and find differences, but I am not talking about that, I am focusing on what the vast majority of consumers look for or need in a car. Today you could pick any vehicle almost blindly and not make a purchasing mistake. That was not the case a few decades ago.

How do they differentiate and sell you cars then? Branding, positioning, marketing. They sell the feeling of owning the car rather than any true technical differentiation, because those really don't matter as much in non-technical markets.

Bottle water is another case. I'll generalize and say that most bottled water is pretty much the same. Or, let's put it another way, no bottled water has magical properties that make it significantly better than the others.

Again, marketing. They are selling you an image. In some cases it's a glass bottle with a different feel or a social mission. The product, however, that thing you drink, most of which you are going to urinate, is basically the same. If you position the product well you can command much higher pricing than the competition.

Computer monitors fall under the same category. Nobody cares any more outside of those using them for very specific applications. There are only a few companies who make LCD panels. Every single computer monitor buys from them. So, if you buy a 24 inch HP vs a Dell monitor they very likely have exactly the same LG or Samsung panel inside. They might even share the rest of the electronics. For most computer users these products are perfectly interchangeable; they just don't care because it makes no difference at all.

Not sure how computer monitor makers differentiate their offerings any more to the masses. Sure, there are folks who are more comfortable with one brand over the other (despite the fact that it might actually be exactly the same product inside) and, of course, there's pricing. This is one example of the fact that significant differentiation might not always be an absolute necessity in order to have a successful billion dollar business.

One area where they do differentiate --although consumers never see it-- would be in the terms and relationship they have with distributors and retailers. This is a big money play. For example, HP could drop two million dollars of inventory into Best Buy warehouses, effectively on consignment, and get paid based on what is sold. Best Buy, will, of course, push those products because they represent pure profit without any capital investment to speak of. This is a distribution chain differentiation that drives sales rather than differentiation to drive consumer behavior.

Books have been written about this topic. I've read a few of them over the years. Still much to learn.