Clayton Christensen gives a lecture on his new book; the key point is:
Focus on what problem you are solving for the customer; not what your product can do, or what you can offer. His example from McDonalds is: What problem does their Milkshake solve: answer: a snack for a long drive, that is easy to consume, and takes enough time to consume, so that the experience is not over too fast. This means that the competitor to McDonalds milkshake is not something from Burger King, but another easily consumed, but long in duration, snack.
well worth watching.
Competing Against Luck: The Story of Innovation and Customer Choice [Clayton M. Christensen, Karen Dillon, Taddy Hall, David S. Duncan] on Amazon.com. *FREE* shipping on qualifying offers.