Instead of trying to do all things well, market leaders choose just one core discipline –best price, best product, or best solution–and do it better that anyone else.
Why does Casio sell a calculator more cheaply than Kellogg can sell a box of corn flakes? Does corn cost that much more than silicon?
- Why is it that Federal Express can “absolutely, positively” deliver a package overnight, but Kenyan Airlines have trouble keeping your bags on their plane? Do they think you don’t care?
Why do some companies endear themselves to us while others just don’t seem to know how to please? Don’t they see what they are doing — and not doing? How long do they think they can get away with it?
No one goes to work in the morning intending to fail. But managers at a great many companies, for all practical purposes, have chosen failure. Don’t they see that the world has changed? Customers today want more of those things they value. If they value low cost, they want it lower. If they value convenience or speed when they buy, they want it easier and faster. If they look for state-of-the-art design, they want to see the art pushed forward. If they need expert advice, they want companies to give them more depth, more time, and more of a feeling that they’re the only customer. That’s precisely why many companies are on a slippery slope. Leading companies are driving the market, and driving competitors downhill. Companies that can’t hold their own will be pushed off a cliff.
Today’s market leaders understand the battle they’re in.
They know they have to redefine value by raising customer expectations in the one component of value they choose to highlight.
But wait a minute! Market leader companies don’t shine in every way. Yet they thrive because they shine in a way their customers care most about. They have honed at least one component of value to a level of excellence that puts all competitors to shame.
No company can succeed today by trying to be all things to all people. To be marketleaders, companies must instead find the unique value that they alone can deliver to a chosen market.
Companies that are beating their competition are succeeding in at least one of these core disciplines.
1) Operational excellence.
Companies that pursue this are not primarily product or service innovators, nor do they cultivate deep, one-to-one relationships with customers. Instead, operationally excellent companies provide middle-of-the-market products at the best price with the least inconvenience. Their proposition to customers is simple: low price or hassle-free service, or both. Wal-Mart, Dell Computer epitomize this kind of company.
2) Product leadership.
These companies concentrate on offering products that push performance boundaries. Their proposition to customers is an offer of the best product, period! Moreover, product leaders don’t build their positions with just one innovation; they continue to innovate year after year, product cycle after product cycle. Apple and Johnson & Johnson, for instance, are product leaders that continue to innovate and delight their customers. For these product leaders, competition is not about price or customer service (though those can’t be ignored), it’s about product performance.
3) Customer intimacy.
These companies focus on delivering not what the market wants but what specific customers want. Customer-intimate companies do not pursue one-time transactions; they cultivate relationships. They specialize on satisfying unique needs, which often only they recognize, through a close relationship with — and intimate knowledge of — the customer. Their proposition to the customer is “We have the best solution for you, and we provide all the support you need to achieve optimum results, or value, or both, from whatever products you buy.”
A value discipline can’t be grafted onto or integrated into a company’s normal operating philosophy. It is not a marketing plan, a public relations campaign, or a way to chat up stockholders. The selection of a value discipline is a central act that shapes every subsequent plan and decision a company makes, colouring the entire organization, from its competencies to its culture . The choice of value discipline, in effect, defines what a company does and therefore what it is. Such thinking leads to ideas that will surprise you.
If your company is going to achieve and sustain dominance, you must first decide where you will stake your claim in the marketplace and what kind of value you will offer to customers. Then you can identify core competencies and reengineer the processes that make up the operating model required to get the job done. The success of these exercises depends entirely on whether and how well they are channelled toward the pivotal issue of increasing customer value, year after year.
Winning Through Cost
Operationally excellent companies deliver a combination of quality, price, and ease of purchase that no one else in their market can match. They are not product or service innovators, nor do they cultivate one-to one relationships with customers. They execute extraordinarily well, and their proposition to customers is guaranteed low price or hassle-free service, or both.
They run like a well-oiled machine, and customers love it.
Winning With Great Products
Companies pursuing product leadership continually push products into the realm of the unknown, the untried, or the highly desirable.
Reaching that goal requires that they challenge themselves in three ways. First, they must be creative. More than anything else, being creative means recognizing and embracing ideas that may originate anywhere — inside the company or out. Second, they must commercialize their ideas quickly. To do so, all their business and management processes are engineered for speed. Third and most important, they must relentlessly pursue ways to leapfrog their own latest product or service. If anyone is going to render their technology obsolete, they prefer to do it themselves. Product leaders do not stop for self-congratulation. They are too busy raising the bar.
Companies excelling in product leadership do not plan for every possible contingency, nor do they spend much time on detailed analysis. Their strength lies in reacting to situations as they occur. Fast reaction times are an advantage when dealing with the unknown.
Winning Through Customer Intimacy
A company that delivers value via customer intimacy builds bonds with customers like those between good neighbours. Customer-intimate companies don’t deliver what the market wants but what a specific customer wants. The customer-intimate company makes a business of knowing the people it sells to and the products and services they need. It continually tailors its products and services and does so at reasonable prices. Its proposition is: “We take care of you and all your needs,” or “We get you the best total solution.”
The customer-intimate company’s greatest asset is its customers’ loyalty. Customers don’t have to be resold through expensive advertising and promotion. Customer-intimate companies don’t pursue transactions; they cultivate relationships. They are adept at giving the customer more than he or she expects. By constantly upgrading offerings, customer-intimate companies stay ahead of customers’ rising expectations — expectations that, by the way, they themselves create. Result: happier, more loyal customers. Again, the operating model of the customer-intimate company is quite different from that of businesses pursuing other disciplines. Its features include:
- An obsession with helping the customer understand exactly what’s needed and ensuring the solution gets implemented properly.
- A business structure that delegates decision-making to employees who are close to the customer.
- Management systems that are geared toward creating results for carefully selected and nurtured clients.
- A culture that embraces specific rather than general solutions and thrives on deep and lasting client relationships.
To companies that decide to play an average game, to dabble in all areas, don’t expect to become a market leader. Choosing a discipline, choosing something that you are great at, that your customers care about is the choice of winners.