Value Discipline for Businesses

Main Point

The main point of this chapter is the importance for companies to focus and excel in one of the three “value disciplines” in order to become the market leader in their industry:

Best cost (operational excellence)- companies must provide lowest price for product; in addition, dependability, and convenience. Key strength is strong execution, manufacturing, delivery, and service systems are kept running smoothly to ensure convenience and lowest prices.

Best product (product leadership)- companies provide the highest-performing products in their industry. Continuously innovating, leading their industry in establishing and redefining the state of the art. At the same time, offer competitive pricing levels. Key strengths are invention, product development, and market exploitation.

Best solution (customer intimacy)- companies develop close relationships with their customers and offer total solutions to their problems. Key strengths are personalized service and advice. They won’t have the best or highest- performing products, but these companies ensure the customers get exactly everything they want and need.

Treacy and Wiersema support their lesson by thoroughly explaining the new rules of competition to maintain market leadership: provide the best offering by committing to one customer value; design the entire operations of your company to fulfill that commitment; maintain appropriate standards in the other values; and, continually improve year after year. The importance of choosing a value discipline is to narrow down the company’s focus to become the “best” in one particular discipline (versus all areas); nevertheless, maintain a level of success in the other areas (e.g. customer service; price; product dependability; etc). Companies cannot maintain market leadership if they are constantly trying to be the finest (best sounds redundant) in all areas. Based on this chapter we learned that companies who try to be paramount in all areas, in reality, are only mediocre and soon surpassed by competitors. The key is to differentiate themselves by focusing in one area to excel and beat competition.

In addition, to succeed in a value discipline the entire organization’s inner/core systems (operating processes, business structure, management systems, and culture) also known as “operating models,” must be focused on fulfilling that specific customer value. Finally, there are three steps to choosing the appropriate value discipline by answering the following questions:

Where does the company stand and why? Go beyond market share and find out where you stand on delivering each of the three value disciplines.

How could the company change to become a market leader? Balance what’s important to customer with which dimension of value your company best competes in.

Which discipline should we choose? Give options to “tiger teams,” small teams of high performers, to determine what operating system is needed to implement each value discipline.

Connection to other concepts discussed in class

The concept of focusing on one area is similar to market segmentation- process of dividing a market into groups of similar consumers and selecting the most appropriate group(s) for the firm to serve. This concept applies to value disciplines. This is because value disciplines position companies to focus on a key competitive strength which meets the needs of a particular customer market. Furthermore, like market segmentation, the purpose is to focus on one market/customer need, because it is difficult to be competitive while focusing on all markets/customer needs.

As described in chapter five, Segmenting to Find the Sweet Spots in a Market that Matters, Nokia was able to internalize the concept of market segmentation and become the leader in the cellular industry in the North American market. At an early state, the company recognized the younger generation’s desire to maintain constant communication with their peers and, as a result, created a market segment that was focused on life-style relevant features (e.g. text messaging) and fashion. To reiterate the importance of choosing a value discipline to excel in, Nokia further segmented their market to understand and serve the full customer life cycle of first time buyers to repeated fifth time buyers, generations apart. The organization narrowed its focus, restructured its operations and excelled in serving their distinct customer market.

Connection to other guru’s ideas

The chapter, Renovate Before You Innovate, relates similar concepts about the importance of analyzing a company’s current infrastructure before simply innovating