What is your business or organisation truly brilliant at? In what areas do you add most value to the market place?
Amazon is brilliant at logistics and this is where it adds most value delivering products and content to your quickly and efficiently. They are operationally excellent. Apple are known for their brilliance in developing new products. They have added most value to the market place through innovative design and creating products and software that is easy to use, reliable and desirable. They are product leaders. A tailor on Saville Row in London making a bespoke suit for you adds the most value by understanding your specific needs and tailoring a product to those needs. They are customer intimate. To succeed, according to Treacy and Wiersema in their book ‘The Discipline of Market Leaders’, you don’t need to excel in each of these three areas of value:
You have to excel in one of the three and meet industry benchmark / minimum standards in the other two. If possible aim to achieve industry excellence standards in two of the three areas. A product leadership company is always innovating. They are either looking to take an existing product category and design a new and significantly better product like Dyson did with their revolutionary ‘Air Blade’ hand dryers, Tesla did with the Model S and Apple did with the original iPhone or invent new technical innovations such as self driving cars or use of stem sells to grow replacement human organs. Product Leadership companies constantly need to bring to market innovative and relevant products, make money from them to recoup massive research and development budgets and then, in time, where necessary cannibalise them with future innovations e.g the iPhone cannibalised the iPod. An operational excellence company has its sole focus on lowest cost of delivery. No stone is left unturned when examining every stage of the value chain with the sole aim of increasing efficiencies enabling them to be the lowest cost provider in the market place. Such obsessive focus on driving out every last drop off efficiency can lead to other benefits, e.g. Ryan Air achieving the fastest aircraft turnaround times and highest punctuality of any airline in Europe. Supermarket chains Aldi and Lidl are other examples of operationally excellent companies. A customer intimate companies is all about refining and bespoking its product or service to meet the needs of one particular customer or a tightly defined micro niche of customers. These highly customer intimate companies are shaping their service or product so that it is unique for each customer. High margin, very low volume. Private jet charter is a customer intimate service. The builder of a home, super yacht or private jet designed to specific requirements for a high net worth client is an example of customer intimate business as is the service provided by the architects / designers working on those projects.
If you are clear as to which of the three value disciplines you are going to achieve industry excellence standards in then it has a direct impact on how you run your business and what you invest in:
A product leadership company will reinvest a high proportion of profits intoresearch and development in order to crate the pipeline of new products.Their recruitment focus will be on talented engineers and designers.
An operationally excellent company reinvests in ways to reduce the costs andincrease the efficiency of product to market. Amazon, for example, charteringits own planes and ships and putting its on delivery van network on the roadand investing into R&D of quadcopter drones to drop your order at yourdoorstep within 30 minutes of order.
A customer intimate business invests in creating an amazing customerexperience and recruits people who are amazing at designing and delivering aworld class and special customer experience.
You cannot be all things to all people. You cannot achieve industry excellence standards in all three, unless it is through a separate division with different culture. For example LandRover achieves Industry excellence standards in Product Leadership, particularly with their design lead launch of the Range Rover Evoque and Velar. They have been improving their operational excellence in terms of supply chain and build quality and efficiency. Reliability has improved over recent models. They have, however, a separate division to create truly bespoke vehicles known as ‘Special Vehicle Operations’.
Is it clear to your market which of the three value disciplines you are ‘all about’? Or are you trying to be all things to all people? If you are creating unique products for your customer are you pricing high enough to make a profit or are you looking to be a lowest cost provider and yet trying to deliver a highly customer intimate service? If you want to be a product leader are you reinvesting enough money into ongoing R&D and training and hiring the best talent for your business?
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