The Discipline of Market Leaders1

The Discipline of
Market Leaders
January 2004
Introduction
Authors
Michael Treacy & Fred Wiersema
Worked for CSC Index the fastest
growing management consulting firm
during the early 90s
Process
3 years of research
80 companies
3 dozen markets
Big, small, old, new, leaders, laggards
Introduction
General findings
No company can succeed by trying
to be all things to all people
Instead, find a unique value that it
alone can deliver to a chosen market
This book answers the why and the
how
Introduction
To whom is this book useful?
Large companies facing turnarounds
Market leaders looking to sustain
their leadership
And, to someone managing a small
business, as small as corner donut
shop in Anytown, USA
By highlighting the key issues upon
which that business will succeed or
fail
Introduction
What do you need to know?
Three concepts
Value proposition
Value driven operating model
Value disciplines
Introduction
The conclusion?
There are three distinct value
disciplines
Operating Excellence
Product Leadership
Customer Intimacy
Introduction
What will this book do for me?
Describe why a value discipline
choice must be made
Provide help in identifying the right
choice for me
Detail the means for implementing it
Ready?
How to Fail in Business

without even trying
Customers today want more of
whatever they value
Leading companies are driving the
market by redefining the level of
value that customers expect
They dont shine in every way

without even trying
Components of value
Price
Time
Premium Service
Quality

without even trying
The New World of Competition
Companies must lower costs to
remain price competitive
Companies can no longer aim for
less than hassle-free service
Customers demand premium service
and raise their standards
continuously
Companies must build products that
deliver nothing less than superiority

without even trying
The Road to Failure (Success)
Its the operating model
Focus and Discipline to
Define an unmatched value proposition
Build a corresponding operating model
Sustain it through constant
transformation and improvement
The New Rules of

Competition
Companies can be hugely
successful by selling continually
improving superior customer value
Master one band in the value
spectrum
The New Rules of

Competition
Customer value formula

Sum of Benefits
Benefits build value to
the extent that the
product or service
improves the
customers performance
or experience.
The costs incurred by the customer

in acquiring a product or service
Costs include
Money spent on purchase and
maintenance
Time spent on errors, delays, and
effort
Both tangible and intangible costs
reduce value.
The New Rules of

Competition
Value Destroyed
Performance
Performance
Performance
Performance
Performance
Performance
Performance
Value Created
The New Rules of

Competition
Different customers buy different
kinds of value
Product performance or uniqueness
Personalized service or advice
Lowest total cost
Market leaders choose to excel in

delivering extraordinary levels of
one particular value
The New Rules of

Competition
Four rules that govern market leaders
actions:
Rule 1: Excel in a specific dimension
of value
Rule 2: Maintain threshold standards
on other dimensions of value
Rule 3: Dominate your market by
improving value year after year
Rule 4: Build a well-tuned operating
model dedicated to delivering
unmatched value
The New Rules of

Competition
Three final key points regarding
customer value proposition
Without customer value, there is no
sustainable business
Value comes from choosing customers and
narrowing the operations focus to best
serve those customers
Customer satisfaction and loyalty are byproducts of delivering on a compelling
value proposition
The Winners Choice

Companies cluster into three
distinct value disciplines
Best total cost, named operational
excellence
Best product, named product
leadership
Best total solution, named customer
intimacy
Differentiate
The Winners Choice

The operating model
Defines the very nature of a
company
Different value disciplines demand
different operating processes
Companies that excel in the same
value discipline have the similar
operating models
The Winners Choice

Manny's
Steakhouse
Operational
Excellence
Product
Leadership
Customer
Intimacy
Invention, product development, and

market exploitation
Processes
End-to-end product supply and

basic services which are
optimized and streamlined
to minimize costs and
hassles
Solution development (helping

the customer understand
exactly whats needed),
results management
(ensuring the solution
gets implemented
properly), and
relationship management
Operations
Standardized, simplified, tightly

controlled, and centrally
planned, leaving few
decisions to the discretion
of rank-and-file employees
Loosely knit, ad hoc, and everchanging to adjust to the

entrepreneurial initiatives and
redirections that characterize
working in an unexplored
territory
Delegates decision making to

employees who are close
to the customer
Focused on integrated, reliable,

high-speed transactions and
compliance to norms
Results driven, measure and reward

new product success and dont
punish the experimentation
needed to get there
Geared toward creating results

for carefully selected and
nurtured clients
Encourages individual imagination,

accomplishment, out of the box
thinking, and a mind set driven by
the desire to create the future
Embraces specific rather than

general solutions and
thrives on deep and
lasting client
relationships
Management
Systems
Culture
Abhors waste and rewards

efficiency
The Winners Choice

Why Choose?
Purposely destines the company to
choose a secondary role in other
disciplines
If you think you are or can be
excellent at all three, youll end up
mediocre at all three
Not choosing at all means letting
circumstances control your destiny
Summary
Businesses succeed by delivering
value to customers
Different customers buy different
value
There are three primary value
disciplines
Market leaders choose one
discipline in which to excel
Discussion Groups
Did you read the material?
Do you buy into the concepts?
If so, are you pursuing one of the
disciplines today or, if not, at this
point which one seems to make
the most sense for your business?

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The Discipline of

How to Fail in Business

How to Fail in Business

How to Fail in Business

How to Fail in Business

The New Rules of

The New Rules of

Customer value formula

The costs incurred by the customer

The New Rules of

The New Rules of

Market leaders choose to excel in

The New Rules of

The New Rules of

The Winners Choice

The Winners Choice

The Winners Choice

Invention, product development, and

End-to-end product supply and

Solution development (helping

Standardized, simplified, tightly

Loosely knit, ad hoc, and everchanging to adjust to the

Delegates decision making to

Focused on integrated, reliable,

Results driven, measure and reward

Geared toward creating results

Encourages individual imagination,

Embraces specific rather than

Abhors waste and rewards

The Winners Choice

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