Four New Rules
According to CSC Index consultants Michael Treacy and Fred Wiersema in “The Discipline of Market Leaders”, there are four new rules that competing companies must obey.
- Provide the best offer in the marketplace, by excelling in one specific dimension of value. Market leaders first develop a value proposition, one that is compelling and unmatched.
- Maintain threshold standards on other dimensions of value. You can’t allow performance in other dimensions to slip so much that it impairs the attractiveness of your company’s unmatched value.
- Dominate your market by improving the value year after year. When a company focuses all its assets, energies and attention on delivering and improving one type of customer value, it can nearly always deliver better performance in that dimension than another company that divides its attention among more than one.
- Build a well-tuned operating model dedicated to delivering unmatched value. In a competitive marketplace, the customer value must be improved. This is the imperative of the market leader. The operating model is the key to raising and resetting customer expectation.
What are Value Disciplines?
Treacy and Wiersema describe three generic value disciplines in their book. Any company must choose one of these value disciplines and consistently and vigorously act upon it. As indicated by the four rules mentioned above.
- Operational Excellence. Superb operations and execution. Often by providing a reasonable quality at a very low price. Task-oriented vision towards personnel. The focus is on efficiency, streamlined operations, Supply Chain Management, no-frills, volume is important. Most large international corporations are operating out of this discipline. Measuring systems are very important. Extremely limited variation in product assortment. But see: Reverse Positioning.
- Product Leadership. Very strong in innovation and brand marketing. Company operates in dynamic markets. The focus is on development, innovation, design, time to market, high margins in a short time frame. Flexible company cultures.
- Customer Intimacy. Company excels in customer attention and customer service. Tailors its products and services to individual or almost individual customers. Large variation in product assortment. Focus is on: CRM, deliver products and services on time and above customer expectations, lifetime value concepts, reliability, being close to the customer. Give decision authority to employees that are close to the customer. Compare: Customer Relationship Management.
The Value Disciplines model is quite similar to the 3 generic strategies from Porter (Cost Leadership, Differentiation, Focus). However there is at least one major difference: according to the Value Disciplines model no discipline may be neglected: threshold levels on the 2 disciplines that are not selected must be maintained. According to Porter, companies that act like this run a risk to get stuck in the middle.Business frameworks like Value Disciplines are invaluable to evaluating and analyzing various business problems. You can download business frameworks developed by management consultants and other business professionals at Flevy here.