Sunday, February 26, 2012

The Discipline of Market Leaders

I recently gave a colleague this classic book on business strategy by Treacy & Wiersema. Although I will not go into detail about the book's content, I do recommend it to anyone involved in defining business strategy. In brief summary, the authors provide compelling evidence that market-leading companies have single-minded focus on one of three value propositions:

1. Product Leadership
2. Operational Excellence
3. Customer Intimacy

Product leadership companies focus on the best product (Apple or Intel). Operational excellence companies focus on the best total cost (Wal-Mart or Southwest Airlines). Customer intimacy companies focus on the best total solution (Nordstrom or IBM).  

I contend that of the three, the least common is customer intimacy. We find many companies focused on reducing costs or creating innovative products, but few that work closely with customers to solve their broader problems. There is a segment of the population that values and is willing to pay for customer intimacy. A simple example of customer intimacy is an exceptional event coordinator that arranges meals, entertainment, lodging, transportation, babysitters, etc. for a large group, and has the connections, know-how and ingenuity to solve everyone's special needs. As our world becomes increasingly more specialized, there is need for companies that deliver broad and customized solutions.  

The organization that I lead focuses on customer intimacy as its value proposition. Yes, we are a technology company and have exceptional technical talent. Instead of focusing on invention for invention's sake, we apply our technology and know-how assist our customers with their specific applications. 

In our industry, customer intimacy is rare. Most companies pursue product leadership and are focused on invention and innovation to deliver the best technology. A few focus on offering "me-too" products at a lower price through operational excellence. Our customer intimacy approach has us working closely with customers in specific markets to leverage our expertise and intellectual property to address their specific requirements. 

Our value proposition provides a strong differentiator in the marketplace, but it is not really a choice. The value proposition stems from the organization's culture and the personality of its leader. I once heard the CEO of a large, successful product leadership business call a customer ignorant because that customer would not buy into the CEO's vision of technology. I would never think a customer ignorant, and always try to learn from our customers, about their perspectives, applications and needs. This is my point: find the natural inclination of your organization and constantly emphasize and build upon that value proposition.


  1. This book looks like a great read! I have begun making inroads of my own with my own business in the big city! I set up my base in a london virtual office and it has really saved me costs whilst increased opportunities for new business! well worth thinking about investing in for start ups.

    1. Hi Mike. Thanks for the comment. Good luck with your startup. The world needs more entrepreneurs!