Choose the Right Value Discipline For Your Business

Choose the Right Value Discipline For Your Business

Think about your ideal target customer for a moment, the one who’s right in the center of your marketing bull’s-eye. What’s most important for those customers?

  1. Is low cost the most important thing for them? Low cost can be low price, but sometimes it’s lowest overall cost of ownership. Sometimes it’s lowest cost of time and irritation, because they want a supplier who is efficient or consistent and dependable.
  2. Does your ideal target customer demand the very newest and best? Is that what’s most important?
  3. Perhaps your ideal target customer thinks that a personalized solution or customized product is most important?

Take a moment to analyze your ideal customer. Which of these three things do they value most? Remember that every customer would like every benefit, but one of these three “Value Disciplines” is most important to them.

A Value Discipline is the way that you deliver value to your customer. It’s also the skeleton of your strategy. You choose a Value Discipline based on who your ideal target customer is and what your ideal target customer values most.

Value Disciplines were first described in a Harvard Business Review article and then in the book The Discipline of Market Leaders by Michael Treacy and Fred Wiersema. Their basic premises are simple:

“Different customers buy different kinds of value. You can’t hope to be the best in all three dimensions, so choose your customers and narrow your value focus. Producing an unmatched level of a particular value requires a superior operating model – a machine – dedicated to just that kind of value.”

Here’s an overview of the three Value Disciplines to help you finalize your decision.

1. Operational Excellence.

Operational Excellence is the Value Discipline you’ll choose if your ideal target customer values low cost more than anything. If you’re going to deliver low cost in any form, you must be ruthlessly efficient. Everything you do needs to serve that goal while you constantly streamline your process and drive out waste and cost.

Walmart and Southwest Airlines are two of the best-known companies that have chosen Operational Excellence as a Value Discipline. For more than half a century, Walmart has constantly improved purchasing and logistics to assure that the lowest-priced goods come in the door while they also fanatically improve internal operating efficiency.

This Value Discipline isn’t just for huge companies. One of my clients, Los Angeles-based Pearl Paradise, is an online retailer out to dominate the global market for pearl jewelry by offering prices that are as much as 80 percent below bricks-and-mortar retailers. In their own words, they want to offer “the best price-for-quality ratio in the industry.” That means sharp buying and hyper-efficient operations, true Operational Excellence.

2. Product Leadership.

Product Leadership is the Value Discipline for you if your ideal target customer wants to have the newest and best above all else. You need creativity and the ability to commercialize ideas quickly. Everything you do should serve the goal of providing your customers with the latest and greatest. You’ll concentrate on innovation, product development, and market exploitation. These same principles apply to service leadership.

Apple in the Steve Jobs era is the best-known example of a Product Leadership company. On October 23, 2001, the company introduced the iPod line of MP3 players. In subsequent years, the iPhone and iPad followed. Each of those products established a standard that everyone else aimed for.

3. Customer Intimacy.

Customer Intimacy is the Value Discipline for you if your ideal target customer wants a personalized solution or customized product more than anything. Companies that choose Customer Intimacy usually offer a wide range of choices and concentrate on providing each customer with a specific solution to their problem. Treacy and Wiersema say that Customer Intimate companies “don’t pursue transactions; they cultivate relationships.”

You’re probably familiar with many of the top firms that select this discipline. They’re the ones that the business magazines and speakers tell those great customer service stories about. Think Nordstrom or Zappos or Ritz Carlton: Those companies have developed strong cultures that empower frontline employees to make decisions that will delight the customer.

Which Value Discipline is right for your business?

The basic idea is to compete in a Value Discipline where you can establish a competitive advantage. As Jack Welch advises, “If you don’t have a competitive advantage, don’t compete.” That’s the idea behind his successful strategic directive at General Electric – that a GE business should be able to be number one or two in its market. If that was impossible, Welch would sell the business.

Deciding on a Value Discipline sounds like a simple and easy process, but it’s very important, and people have strong feelings about it. You’re going to pick a single discipline to be your primary Value Discipline. But that doesn’t mean you can ignore the others. Look at the following diagram.

Choose your Value Discipline.

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It would be wonderful if you could be excellent at all three Value Disciplines. The problem is that trying to cover them all means that you’re spending time and energy and money on things that don’t matter the most to your ideal target customers. Instead, I want you to commit to becoming truly excellent at one Value Discipline and good enough at the other two.

“Good enough” means that you match the industry standard in areas that are not your primary Value Discipline. Walmart obsesses about Operational Excellence, but it’s good enough on Product Leadership and Customer Intimacy. Apple pours its heart and soul into Product Leadership and matches the competition on Operational Excellence and Customer Intimacy.

Here’s a chart that will help you understand what your strategic focus should be, based on the Value Discipline you choose to excel at.

Your Value Discipline determines your strategic focus.

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Ask each individual to make a choice based on the analysis you’ve done so far. Then come together as a group and work out the decision for your company.

What is your chosen Value Discipline?

What Strategic Moves do you need to make now and within the next three to five years to excel at this Value Discipline?

Highlight your answers to this last question so we can revisit them later. When you’re ready, turn the page, and we’ll begin working on your Core vs. Non-Core Activities ….”

Excerpted from the book: Business Execution for RESULTS, by Stephen Lynch

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Until next time…
Stephen

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