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Value Disciplines
© K.E. Homa
Proprietary Material
Professor Ken HomaGeorgetown University
Value Disciplines
CustomerIntimacy
ProductLeadership
OperationsExcellence
Planning Finance
Technology Info Systems
Value Disciplines
Customer Intimacy and Other Value Disciplines,HBR, January – February 1993
The Discipline of Market Leaders - Choose Your Customers, Narrow Your Focus, Dominate Your Market,Addison-Wesley, 1993
Credited to Treacy & Wiersema, CSC Index
Value DisciplinesWhat successful companies do …
• Redefine value for customers.
• Build powerful, cohesive business systems that deliver more of that value than competitors do.
• Raise customers’ expectations beyond the competition’s reach.
Value DisciplinesBasic Premise
• Companies that have taken leadership positions in their industries typically have done so by narrowing their business focus, … by delivering superior customer value in line with one of three value disciplines:
Operational excellence
Customer intimacy
Product leadership
• Each discipline requires different processes, organization structures, and management systems & rewards..
Value Disciplines
• Operational Excellence … providing customers with reliable products or services at competitive prices, delivered with minimal difficulty or inconvenience
• Product Leadership … providing products that continually redefine the state of the art and render competitors’ offerings obsolete
• Customer Intimacy … segmenting and targeting markets precisely and then tailoring offerings to match exactly the demands of those niches. .
Value DisciplinesOperational Effectiveness
• Objective: Lead industry in price & convenience (i.e. minimal inconvenience)
• Relentlessly seek to ways to Minimize overhead costs Eliminate intermediate production steps Reduce transaction and other “friction” costs Optimize business processes across functional
and organizational boundaries
• Reengineer processes with an emphasis on efficiency and reliability
• Build their operations around information systems that emphasize integration and low-cost transaction processing.
Value DisciplinesOperational Effectiveness
• Operations: standardized, simplified, tightly controlled, often centrally
• Processes: Streamlined and optimized processes for end-to-end supply and basic services
• Information Technology: Build operations around information systems that emphasize integration and low-cost, high speed, reliable transaction processing.
• Culture: Abhors waste, rewards efficiency
Value DisciplinesCustomer Intimacy
• Goals: Customer satisfaction & loyalty; company profitability
• Continually tailor and shape products and services to fit an increasingly granular definition of the customer.
• Typically look at the customer’s lifetime value to the company (CLTV), not the value of any single transaction.
• Develop a tight bond with customers by designing operating models that allow them to address each customer or small subsegment of their market individually
• Infrastructures facilitate multiple modes of producing and delivering products or services.
• Empower the people actually dealing with the customer
Value DisciplinesCustomer Intimacy
• Focus: Customer relationships, tailored, specific solutions
• Business processes stress flexibility and responsiveness.
• Information systems collect, integrate, and analyze data from many sources.
• Organizational structure emphasizes empowerment of people working close to customers
• Hiring and training programs stress the creative decision-making skills required to respond to individual customer needs.
Value DisciplinesProduct Leadership
• Goal: Produce a continuous stream of state-of-the-art products and services … and new ways to go to market
• Invented anywhere… recognize and embrace ideas that originate outside the company … continually scan the landscape for new product or service possibilities
• Engineered for speed … commercialize their ideas quickly … avoid bureaucracy … make decisions quickly … look for new ways – such as concurrent engineering – to shorten their cycle times
• Self-obsolescence … relentlessly leapfrog … pursue new solutions to the problems that their own latest product or service has just solved
• Risk tolerant … have the infrastructure and management systems needed to manage risk well… react quickly to contain risks.
Value DisciplinesProduct Leadership - Creativity
• Recognize and embrace ideas that originate outside the company
• Listen to and consider ideas, however unconventional and regardless of the source
• Continually scan the landscape for new product or service possibilities
• Relentlessly pursue new solutions to the problems that their own latest product or service has just solved
Value DisciplinesProduct Leadership
• Focus: Invention, product development, market exploitation
• Structure: Loosely knit, ad hoc, dynamic
• Systems: Results-driven, reward success, tolerate failure
• Culture: Forward-drive, imagination, accomplishment
Value DisciplinesFinal Words
Many companies falter simply because they lose sight of their value discipline.
Reacting to marketplace and competitive pressures, they pursue initiatives that have merit on their own but are inconsistent with the company’s value discipline.
Inconsistent companies often appear to be aggressively responding to change.
In reality, however, they are diverting energy and resources away from advancing their operating model.
Value Disciplines
CustomerIntimacy
ProductLeadership
OperationsExcellence
Planning Finance
Technology Info Systems
Value DisciplinesExamples
• Customer Intimacy: USAA InsuranceNordstrom
• Operations Excellence: WalmartToyota
• Product Leadership: AppleNike J&J
Value Discipline Variants
Appendix
Value Disciplines
CustomerIntimacy
ProductLeadership
OperationsExcellence
Planning Finance
Technology Info Systems
Value Disciplines
CustomerIntimacy
ProductLeadership
OperationsEffectiveness
Planning Finance
Technology Info Systems
Value Disciplines
CustomerSatisfaction
Product& ProcessInnovation
OperationsEffectiveness
Planning Finance
Technology Info Systems
Value Disciplines
CustomerSatisfaction
Product& ProcessInnovation
OperationsEffectiveness
Planning Finance
Technology Info Systems
Value Disciplines
CustomerIntimacy
Product& ProcessInnovation
OperationsExcellence
Planning Finance
Technology Info Systems
Value Disciplines
CustomerIntimacy
Product& ProcessInnovation
OperationsExcellence
Planning Finance
Technology Info Systems
Nordstrom
Apple
UPS
ToyotaAmazon
USAA
Value Disciplines
CustomerIntimacy
Product& ProcessInnovation
OperationsExcellence
Planning Finance
Technology Info Systems
Nordstrom
Apple
UPS
ToyotaAmazon
USAA
Value Disciplines
CustomerIntimacy
ProductLeadership
OperationsExcellence
Planning Finance
Technology Info Systems
