Sunday 2 September 2007

Operatinal Excellence, Product Leadership or Customer Intimacy?

One of my favorite management concepts is the one from a book titled, The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market, by Michael Treacy and Fred Wisrsema. This book describes three types of "value discipline":
  • Operational Excellence
  • Product Leadership
  • Customer Intimacy
The Operational Excellence is an approach to the market, dedicated to providing the lowest cost goods and services, while at the same time minimizing problems for the customer. The basic philosophy is about the low or lowest price and hassle-free service. The examples of companies following this value discipline could be Walmart and McDonalds.

The Product Leadership is an approach to the market, dedicated to providing the best possible products from the perspective of the features and benefits offered to the customer. The basic philosophy is about the products that push performance boundaries. The examples could be Intel, Nike and 3M.

Finally, the Customer Intimacy is an approach to the market that involves the selection of one or few high-value customer niches, followed by an obsessive effort at getting to know these customers in detail. The basic philosophy is about delivering what specific customers want. The examples could be Airborne Express and Nordstrom.

It is typically said that a company can excel in at the most two value disciplines but not all. Actually it is advised to focus only on one value discipline. I agree that focus on only one of these value disciplines would help it achieve market leadership.

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