A summary of the highly insightful book by Treacy & Wierseman
This book is the result of a three-year study of eighty corporations in thirty-six markets. Key marketing point: You can’t succeed by being all things to all people. You must focus on the unique value that your company can consistently deliver to a selected market. While you must continually improve the value offered to your customers, there are three distinct value disciplines; each produces a unique kind of customer value.
Value #1 – Operational Excellence: Middle of market products at best price, least inconvenience. Examples: Wal-Mart, Henry Ford’s Model T., McDonald’s, and GE and Maytag Appliances. They are not product or service innovators, nor do they cultivate 1:1 relationships. However, they do execute extraordinarily well with guaranteed low price and hassle-free service. Operations are standardized, simplified, tightly controlled and centrally planned, leaving few decisions to the discretion of localized rank-and-file employees. Management systems focus on integrated, reliable, high-speed transactions and compliance to norms. Operationally excellent companies have a culture that abhors waste and rewards efficiency.
Value #2 – Product Leadership: Offers the best product and continuously innovates. Examples: Sony, Johnson & Johnson, Intel Computer Chips, Apple Computer, and Nike Footware. This type of company continually pushes its products into the realm of the unknown, the untried, and/or the highly desirable. It concentrates on offering customers products or services that expand existing performance boundaries. A product leader’s key proposition to its customers is: We have the BEST product – period.
These companies bring in new ideas, develops them quickly and then looks for ways to improve them. They have a business structure that is loosely knit, ad hoc, and ever changing to adjust to the many entrepreneurial initiatives and redirections that characterize working in unexplored territory. It has management that measures and rewards new product success, and does not punish the experimentation needed to get there. Therefore, it creates a culture that encourages individual imagination, accomplishment, “out of the box” thinking, and a mind set driven by the desire to innovate and create the future.
Value #3 – Customer Intimacy: Focuses on specific customer needs, cultivates relationships, satisfies unique needs and has the best solutions. Examples: IBM in the l960s and 70s, and Nordstrom’s today. These organizations build strong interdependent relationships with their customers. To do this one must become an expert in the customer’s business/ life and offer desirable solutions/products. The critical objective is to increase share of your client’s business – and to NEVER lose a client (intelligent Loyal Customer management).
A customer-intimate company creates a culture that has its people do whatever it takes to please the customer. It must take the long view by assuring that every initial client transaction leads to a long-term relationship. Key points to achieve this are:
- Creating a team that is a strategic combination of both seasoned and “out of the box” inventive people to serve the customer. This business structure and strategy must delegate decision-making to employees who are close to the customer. Its focus is to create positive results for a carefully selected and nurtured group of customers.
- It must have real, meaningful tailoring and customization of products and services verses vague “value added” verbiage. To do this, it must integrate superior personnel with unparalleled knowledge, and the quality application of the newest and finest techniques to the customer’s key needs. To achieve true 1:1 customer intimacy, one must strive to have an extended, ample network of products, services and people. The company must be seen by its customers as having the ability to provide one key thing, above all else: SOLUTIONS!
Thesis of The Discipline of Market Leaders: The proper selection of an appropriate value system is the one key act that shapes plans, decisions, strategy, culture, and core competencies. It defines what a company does and therefore what it is. If you decide to focus on all three value areas at once, you create excess managerial complexity, making it very difficult to make appropriate decisions, resolve conflicts, set priorities and achieve greatness.
By focusing primarily on the one key value discipline that suits your business best, you can enjoy robust growth and sustained success. You will be able to predict greater profitability, and become a market leader in your domain.