The Discipline of Market Leaders

Book Summary
The Discipline
of Market
Leaders by
Michael Treacy
and Fred
Wiersema
11
Prof. Sameer
Prepared By: Prof.
Mathur,
Sameer
Ph.D.Mathur, Ph.D.
Brief Summary
Why do some companies offer much lower cost
than others, and why do some offer superior
customer service? Why are some companies
better than other companies at some things but
not others?
Answer: Focus
Prof. Sameer Mathur, Ph.D. 2

Brief Summary
Market Leaders don’t try to be everything to
everyone. Different customers place greater value
on different things.

Brief Summary
The market leaders are the ones who have
chosen to excel in one of the customer “value
disciplines”:
Best Cost, Best Product, Best Solution

Brief Summary
Focus means knowing:
• Which customer value discipline to choose.

Brief Summary
• How to design your entire organization around

one particular customer value while still
maintaining appropriate standards in the other
areas of customer value.

Brief Summary
• How to offer better value year after year to avoid

losing your leadership.

Value Disciplines
Customers focus on one of three types of value:
1. Operational Excellence
2. Product Leadership
3. Customer Intimacy
These are called value disciplines. Successful

companies focus on one of these disciplines and
become the best in that value discipline.

Value Disciplines
Operational Excellence: Companies which
focus on either low prices, dependability, or
convenience.

Value Disciplines
Product Leadership: When companies
focus on the highest-performing products
in their industry.

Value Disciplines
Customer Intimacy: When companies focus on
close relationships with, and total solutions for,
their customers.

Seven Points
1. Customers Want Different Kinds of Value

2. What is a Value Discipline?
3. The Discipline of Operational Excellence
4. The Discipline of Product Leadership: Turn
Invention into Breakthrough Product
5. The Discipline of Customer Intimacy: Become
Your Customer’s Partner
6. Three Steps to Choosing a Value Discipline
7. Careful: The Copycats are Watching

Customers fall into one of only three different

categories:
First Category: The most important value of a

product is its performance.

Second Category: Most

important value is
personalized service and
advice.
Third Category: Total Cost is

primary consideration.

Customers Want Different Kinds of Value
Total Cost refers to how much customers will pay
for the entire time that they own a product.
Customers don’t want to pay a very low price
initially only to have the product cost them in the
long run because of constant repairs.

The Question for Businesses is how to excel at
fulfilling the value expectations of all of the
different customers.
The answer: Don’t try.

The New Rules of Competition
Different customer-value offerings demand

different operational processes, different
priorities and different resources.
Therefore, it’s impossible for any one company,

no matter how large, to commit operations and
strategy to more than one value offering.

The New Rules of Competition
Companies must choose one value and commit to

it. However, you must still maintain an
appropriate level of customer value in the other
value dimensions, or the value you have chosen
will be sabotaged.

The New Rules of
Competition
Companies must avoid

resting on their laurels. To
keep their leadership,
they must continuously
improve their
performance in their
chosen customer value
discipline.

The New Rules of Competition in Summary
1. Provide the Best offering by committing to

one customer value
2. Design the entire operations of your company
to fulfill that commitment
3. Maintain appropriate standards in the other
values
4. Improve Year after Year

2. What is a Value Discipline?
A Company’s ability to fulfill the expectations of
customers is called its “value discipline.”
Market leaders beat the competition by focusing

on one of three value disciplines: operational
excellence, product leadership and customer
intimacy.

What is a Value Discipline?
Operational Excellence
Operationally excellent companies fulfill the

expectations of customers who demand the best
total cost from their products.
Must provide low prices, dependability and

convenience. Their key strength is that they
execute well.

Product Leadership
Product Leaders offer customers the highest-

performing products in their industry.
The key strengths of product leaders are

invention, product development, and market
exploitation.

Customer Intimacy
Customer-intimate companies develop close

relationships with their customers and seek to
offer total solutions to their problems.

Why Choose?
Companies that aim at all three

disciplines don’t excel. They are
merely mediocre across the
board. It isn’t offering anything
better than everyone else in their
industry.

The Operating Model
To succeed, you must design

the company so that all of its
inner workings – operating
processes, business structure,
management systems, and
culture – are coordinated and
focused on fulfilling the chosen
customer value.

The Operating Model
These inner workings, called

“operating models” differ with each
value discipline.
Operationally excellent companies

design their operations to ensure
dependability in product supply and
hassle-free customer service.

 Product Leaders’ operating systems center

around invention, product development, and
market exploitation.
 The processes of customer-intimate companies

give employees freedom to adapt to customer
needs and requests, and resources to implement
solutions.

3. The Discipline of Operational Excellence: Offer the Best
Total Cost Deal
Operationally excellent companies offer

customers one thing: the lowest possible cost of
a product.

The Discipline of Operational Excellence
Tangible and Intangible Costs
Total cost cannot be measured solely at time of

purchase. It must include the cost to the
customer during the life of the product.
A cheap product that breaks the next day costs

more than a more expensive product that lasts a
year.

Tangible and Intangible Costs
To get a defective product repaired or buying a

new product not only costs the customer money,
but it also costs them their time.
Although intangible, loss of time adds to the total

cost of the product. Convenience is also an
intangible item.

The Transaction Environment
Internal processes and

corporate attitudes should be
geared to offering flawless
transactions.
Eliminate time consuming

processes and streamline the
customer transaction
process.

Vertical vs. Virtual Integration
Supply and distribution systems are very

important to operationally competent companies.
Purchase authorizations, receipt notifications,

and other intracompany red tape must be
eliminated. The result: smoother distribution,
greater dependability, and lower prices.

4. The Discipline of Product Leadership: Turn Invention into
Breakthrough Product
Product leaders are inventive companies. They

bring to market a product or service never offered
before.
Performance is key.

The Discipline of Product Leadership
Vision: A Target for Dreams
While operationally excellent companies

emphasize procedures, product leaders
emphasize the imagination.
Product leaders harness aimless dreaming by

setting ambitious but clear targets. They begin
with a vision and then try to turn that vision into
reality.

Product-Leader People
The talent to imagine an ideal

and the ability to turn that ideal
into reality are the attributes of
people at product-leading
companies.
Must be creative and versatile

and must be able to work in
teams.

To keep their people on track toward a new

development, managers of product-leading
companies:
1. Organize the work in sets of clear challenges
They put milestones on the path to success so

that employees have cause for celebration on the
way.

2. Don’t create business

structures that oppress
Heavy bureaucracy doesn’t lend

itself to innovation. Product
leaders break people up into
teams or clusters.

3. Emphasize cross-functional procedures in the

later stages of product development.
Product leaders don’t want to discover too late

that an engineer’s design can’t be manufactured,
or that it’s not what customers wanted. The
answer: coordinated efforts involving research
and development, production and marketing
departments to catch potential problems.

5. The Discipline of Customer Intimacy: Become Your
Customer’s Partner
Customer-intimate companies go beyond product and

price to offer the best total solutions to their
customers’ problems.
They have knowledgeable and caring salespeople

who patiently work with customers to ensure that
their purchases fulfill their needs and expectations.

The Discipline of Customer Intimacy
Business Partners
The most intimate of the customer-intimate

companies will take on personal responsibilities
for certain aspects of their customer’s business.
The main requirement for customer-intimate

companies to be successful is that they have a
thorough knowledge of their customer’s
business, including its business processes.

The Discipline of Customer Intimacy
Customer-Intimate People
They require decentralized

organizations with empowered
employees. Their strength is
their flexibility to respond and
adapt their product/service to
customer’s needs and have
multitalented employees.

6. Three Steps to Choosing a Value Discipline
To choose the right value discipline, you must

answer 3 questions:
1. Where does the company stand and why?
What dimensions of value do your customers

care most about? How important are secondary
dimensions of value?

Three Steps to Choosing a Value Discipline
2. How could the company change to become a

market leader?
Balance what’s important to the customer with

which dimension your company can best
compete in. Look at whether you would be able to
match the operating systems of value leaders in
your industry.

3. Which discipline should we choose?
Take created options and give them to “tiger

teams” (small teams of high impact performers)
to determine what operating systems need to be
in place to implement strategic options.

*Only by choosing explicitly in favor of one value

discipline will you be able to rise above
mediocrity to achieve market leadership.*

7. Careful: the Copycats are Watching
When you’ve reached the top and become a

market leader, you become a target for
competitors. Business is a copycat world.

Careful: the Copycats are Watching
The only way to stay above the pack is to improve
your performance continuously. You should be
your best competitor.
If you are a product leader, try to render your own

products obsolete.

Don’t Forget Other Value Disciplines!
Focus on one, but improve performance in the

others. If you don’t, the gap between you and the
competition in these secondary disciplines will
become so great that it will eliminate any value
advantage from your primary discipline.

The challenge for product-leading companies is
to realize when customer attitudes and desires
that led previously successful products have
changed.
Groundbreaking service of yesterday can become

today’s standard. Must be aware of changing
tastes, or else your clientele will move elsewhere.

IMAGE CREDITS
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Sameer Mathur
Indian Institute of Management,

Lucknow
Marketing Professor 2013 –
Marketing Professor 2009 – 2013
Ph.D. and M.S. (Marketing) 2003 – 2009
53
Prof. Sameer Mathur, Ph.D.

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Book Summary

Prof. Sameer Mathur, Ph.D. 2

Prof. Sameer Mathur, Ph.D. 3

Best Cost, Best Product, Best Solution

Prof. Sameer Mathur, Ph.D. 4

• Which customer value discipline to choose.

Prof. Sameer Mathur, Ph.D. 5

• How to design your entire organization around

Prof. Sameer Mathur, Ph.D. 6

• How to offer better value year after year to avoid

Prof. Sameer Mathur, Ph.D. 7

These are called value disciplines. Successful

Prof. Sameer Mathur, Ph.D. 8

Prof. Sameer Mathur, Ph.D. 9

Prof. Sameer Mathur, Ph.D. 10

Prof. Sameer Mathur, Ph.D. 11

1. Customers Want Different Kinds of Value

Prof. Sameer Mathur, Ph.D. 12

Customers fall into one of only three different

First Category: The most important value of a

Prof. Sameer Mathur, Ph.D. 13

Second Category: Most

Third Category: Total Cost is

Prof. Sameer Mathur, Ph.D. 14

Prof. Sameer Mathur, Ph.D. 15

The answer: Don’t try.

Prof. Sameer Mathur, Ph.D. 16

Different customer-value offerings demand

Therefore, it’s impossible for any one company,

Prof. Sameer Mathur, Ph.D. 17

Companies must choose one value and commit to

Prof. Sameer Mathur, Ph.D. 18

Companies must avoid

Prof. Sameer Mathur, Ph.D. 19

1. Provide the Best offering by committing to

Prof. Sameer Mathur, Ph.D. 20

Market leaders beat the competition by focusing

Prof. Sameer Mathur, Ph.D. 21

Operationally excellent companies fulfill the

Must provide low prices, dependability and

Prof. Sameer Mathur, Ph.D. 22

Product Leaders offer customers the highest-

The key strengths of product leaders are

Prof. Sameer Mathur, Ph.D. 23

Customer-intimate companies develop close

Prof. Sameer Mathur, Ph.D. 24

Companies that aim at all three

Prof. Sameer Mathur, Ph.D. 25

To succeed, you must design

Prof. Sameer Mathur, Ph.D. 26

These inner workings, called

Operationally excellent companies

Prof. Sameer Mathur, Ph.D. 27

 Product Leaders’ operating systems center

 The processes of customer-intimate companies

Prof. Sameer Mathur, Ph.D. 28

Operationally excellent companies offer

Prof. Sameer Mathur, Ph.D. 29

Total cost cannot be measured solely at time of

A cheap product that breaks the next day costs

Prof. Sameer Mathur, Ph.D. 30

To get a defective product repaired or buying a

Although intangible, loss of time adds to the total

Prof. Sameer Mathur, Ph.D. 31