Books : Marketing and Strategy : Marketing and Strategy Book Summaries
 The Discipline of Market Leaders - Michael Treacy, Fred Wiersema
Choose your customers, narrow your focus, dominate your market
|
|
|
Choose your customers, narrow your focus, dominate your market
Michael Treacy and Fred Wiersema
Publisher: Reading, Mass: Addison-Wesley Pub. Co
ISBN: 0201406489
This is a synopsis only. RESULTS.com recommends you buy the original book.
- Choose Your Customers
- Narrow Your Focus
- Dominate Your Market
No company can succeed today by trying to be all things to all
people. It must instead find the unique value that it alone can
deliver to a chosen market. 'Value Discipline' Basic Philosophy Examples 1) Operational excellence - low or lowest price and hassle-free service - Wal-Mart, McDonalds 2) Product leadership - offer products that push performance boundaries - Intel, Nike, 3M 3) Customer intimacy - delivering what specific customers want - McKinsey, Nordstrom
There are 3 different types of 'value discipline' (generic strategy)
that successful companies can adopt to command leadership in their
markets.
The decision depends upon the sort of product or service that they
provide, and upon the organizational culture that they maintain.
The 3 'value disciplines' (generic strategies) are summarized in the chart below:
Operational Excellence
- provide the lowest cost goods and services, while minimizing problems for the customer
- efficient management of people
- employees are trained in the most efficient and lowest cost way of doing things
- efficient transactions - for greater efficiency and speed
- processes between suppliers and the organization are often merged
- (for example, the quality control function, which historically has taken place once by the supplier to ensure a good product leaving their shop, and once at the buyer's end to ensure a good product coming in, is merged into one quality control inspection, undertaken under the auspices of both the supplier and the customer - this reduces cycle time considerably, allowing just-in-time supply and at lower overall cost as well)
- measurement systems - to ensure rigorous quality and cost control
- monitor and measure all processes
- continually searching for ways to reduce cost, and improve service and quality
- manage customer expectations - under the principle that 'variety kills efficiency'
- provide only one or a limited number of product or service options, and manage customer expectations accordingly
Product Leadership
- Provide the best possible product / service in terms of the features and benefits offered to the customer.
- innovation - small ad hoc working groups
- an 'experimentation is good' mind-set
- compensation systems reward success
- constant product innovation is encouraged
- a risk-oriented management style
- product leadership companies are innovators
- recognize that there are risks (as well as rewards) inherent in new ventures
- current success & future prospects lie in its talented design people and those who support them
- need to educate and lead the market regarding the use and benefits of new product
Customer Intimacy
- Select one or a few high-value customer niches, and understand their needs in detail.
- This requires anticipating the target customer's needs as well as (if not better than) they themselves do, and sometimes sharing risks with them when the development of new products or services is required:
- full range of services available to serve customers upon demand
- may involve running a 'hollow company' - where a variety of goods or services are available quickly through contract arrangements, rather than the supplier business having everything in stock all the time
- philosophy and business processes practices that encourage deep customer insight and breakthrough thinking about how to materially improve the client's business are essential
Because of the focus of management time and resources that is
required, a firm can realistically choose only 1 of these 3 value
disciplines in which to specialize.
Most companies in fact, fail to specialize in any of the three, and
thus they realize only mediocre or average levels of achievement in
each area. These companies will not be market leaders.
In today's business environment of increased competition and the need
more than ever before for competitive differentiation, their
complacency will not lead to increased market share, sales or profits.
The authors state, "...when we look at these complacent firms, we find
companies that don't excel, but are merely mediocre on the three
disciplines. Sure, as the ante has risen in their markets, they've
improved their cost structure and become more aware of their customers.
They've added new products and line extensions over the years. They've
kept up with rising parity levels to stay in the game. They've
maintained threshold levels of performance in each dimension of value.
hat they haven't done is create a breakthrough on any one dimension to
reach new heights of performance. They have not traveled past
operational competence to reach operational excellence, past customer
responsiveness to achieve customer intimacy, or beyond product
differentiation to establish product leadership. To these managers we
say that if you decide to play an average game, to dabble in all areas,
don't expect to become a market leader."
Phase 1 - Understanding the status quo in your business
- What dimensions of value do our core customers care about?
- What is their primary or dominant decision criterion?
- Which competitor provides the best value in each of 3 value dimensions?
- How do we measure up against our competitors on each dimension of value?
Phase 2 - Identify the realistic options for your company
- What are the benchmark standards of value performance that meet customer expectations?
- How do other firms achieve these standards?
- For value discipline leaders, what will be their standards of performance three years from now?
Phase 3 - Detailed designs and hard choices
- What should our new operating model look like?
- What will be our core processes, management systems, structure?
- How will we produce superior value in 1 of the 3 value disciplines?
- How will we retain industry parity in the other value dimensions?
- What is the business case - including costs, benefits and risks - in pursuing this option?
- What are the critical success factors that can make or break this solution?
- How will we transition to this new operating model over a two- to three-year period?
|
|
Comment: