First, thanks to Mike Murray for his kind words. In his response (here [1]) to my thoughts on differentiation in Wednesday's TDI (here [1]), Mike says some nice things about what I'm doing. Note to readers, positive feedback is appreciated - though that and $4 will get you a coffee at Starbucks. Remember I BITE EVERYONE'S HAND (here [1]).

But in all seriousness, let's dig a bit deeper into what constitutes a durable advantage and clearly it's not all about technology. But I'll also maintain that we have VERY few companies that have navigated multiple product cycles successfully and kept a competitive advantage for 5-10 years.

As Mike correctly points out (and had kind of slipped my mind) competitive advantage is about more than technology innovation. Customer intimacy and operational excellence are certainly other ways to differentiate. Wal-Mart has thrived because their scale allows them efficiencies that other competitors can only dream about. Dell excelled for a long time because both customer intimacy and operational excellence resulted in a distinct business model advantage for many years.

But here's the kicker, none of these areas of differentiation last forever. HP has come back to regain the market share lead in PCs because they suck a bit less than they used to. Customizing PC's on a web site is now common place and HP sliced headcount until they were price competitive. Dell is in a world of hurt right now because they haven't innovated their business model to keep ahead. They also alienated a lot of customers as they were scaling, so their customer intimacy advantage is also gone.

I'd also question whether Sony really has innovated since the days of the Walkman. I mean they MISSED the whole MP3 thing. They hardly even showed up to the game. They make nice LCD TV's (I have one), but it's not like they were the first to either LCD or DLP big screens. So where is their innovation again?

I guess my point is that size itself has become a source of competitive differentiation. Not sure what Geoffrey Moore has to say about that, but companies like Cisco, Microsoft, Oracle and Intel can weather the storm of a new, more innovative (or more customer intimate or more operationally excellent) competitor because they have momentum and inertia on their side.

These huge companies have multiple product lines and they have diversified their operations, so even a new competitor that consistently kicks their ass (like Google is doing to MSFT in search) hardly puts a dent in the machine. Of course, a company cannot get their ass kicked for years without a successful response and not have the luster knocked off the rose. Novell and 3Com are examples of that.

But ultimately my point is that long-lasting differentiation is a myth. No technology brands create the loyalty that you'd need to create a truly durable advantage. Whether you consider the innovation, intimacy or operational excellence flavors of differentiation, the only way to insulate yourself from the cyclical nature of everything is to be big enough to weather the storm.

That's one of the reasons why "Big is the New Small" and "Huge may be the New Big."