Yes you are missing basic parts. There are certain genes that produce proteins that then bind to other control areas of the DNA that affect how much other genes

Yes you are missing basic parts. There are certain genes that produce proteins that then bind to other control areas of the DNA that affect how much other genes are expressed. These last genes translate to proteins that make e.g. a pancreatic cell what it is. But this is a tree of increased specialization on which embryonic stem cells become e.g. blood stem cells which then specialize to rbc, white platelet producers.