I just finished re-reading a book that I first discovered many years ago.
The Discipline of Market Leaders by Brian Treacy and Fred Wiersema (Basic Books, 1997) had a major impact on me when I first read it in 2002, even though it was already about six years old. Even in January of 2010, almost a decade and half after its advent, it still packs a punch.
According to the authors, to build a market-leading company, you must choose one of three dimensions of value to build that business on. While your performance cannot be substandard in any of the three areas, you must commit fundamentally to one, building their entire culture and operations around that core area in order to separate from the pack. You must stick the proverbial stake in the ground.
Here are the three dimensions of value and the components of the operating model needed to excel in each:
1. OPERATIONAL EXCELLENCE (Delivering the best-cost solution)
Operating imperative: Rigorously developed and deployed systems that minimize cost and maximize predictability/reliability.
- Emphasis on processes that are standardized, simplified and tightly controlled, leaving few decisions to rank-and-file employees
- Management systems monitor and reward speed, reliability and adherence to process
- A culture extols efficiency and demonizes waste
2. PRODUCT LEADERSHIP (Delivering the best-quality solution)
Operating imperative: Promotion of processes of invention, product development, and continuous market exploitation.
- A business structure that is less formal and more fluid and entrepreneurial to adjust quickly to new market developments and destabilizations
- Management systems that measure and reward results more than adherence to process, that emphasize new product success, and that don’t punish the experimentation and occasional maverick behavior needed to get there
- A culture that encourages individual imagination, accomplishment, out-of-the- box thinking, and a mind-set driven by the desire to create the future
C. CUSTOMER INTIMACY (Delivering what a specific set of customers want and need)
Operating imperative: Building, strengthening and maintaining an enterprise-wide orientation towards solution development, i.e., working with and helping the customer understand exactly what is needed and developing the processes and programs to get it to them.
- A business structure that pushes the decision-making power to those closest to the customer
- Management systems measure and reward achieving sustainable results for strategically chosen clients
- A culture that emphasizes those values and principles that maximize deep, long-lasting client relationships
Over the years, various critics have taken some shots at the book. Some said Treacy and Wiersema insufficiently anticipated how much globalization would complicate market strategies. Others argued that the book was too simplistic in its view of customer behavior. Still others insisted that the authors weren’t rigorous enough in their analysis of whether their approach would work across a broader array of industries.
While these criticisms may have some modicum of merit, I think they essentially miss the point: The core message of The Discipline of Market Leaders is the value of discipline itself — the idea that the true value of a strategy is that it provides the central organizing principal or philosophy that guides everything that the organization does. By definition, any company that can focus in this way is bound to have a huge advantage over its competitors.
But don’t just take my word for it. I challenge you to read the book for yourself and think through how you might apply it to your organization.
Even if you don’t end up changing your policies, processes or procedures, if you are like the overwhelming majority of my clients, just going through the exercise of thinking strategically about how you interface with your market will prove invaluable.
So what are you waiting for?
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