If you’re struggling with strategy, focus on the three market disciplines
There’s an old sales adage that goes like this: “You can have good, fast, and cheap, but you can only pick two.”
It’s a snazzy turn-of-phrase, but I’ve not found any qualitative or quantitative support for this. As a buyer, I want it all — good quality, reasonable price, and easy access. And if you’re not willing to meet that expectation, well, I’ll gladly find a seller who will.
Caveat venditor (seller beware), right?
How, then, are some brands — Amazon, Telsa, Mayo Clinic, to name a few — able to rise above the others and enjoy such sustainable profitability and popularity?
I think the answer lies in a long-forgotten book.
If you are struggling to grow your brand in today’s marketing rebellion, fighting pricing pressures, feeling lost with your strategy, or building your own personal brand, then this article is for you.
The Three Disciplines of Market Leaders
A long time ago, in a decade far, far away (1995), Michael Treacy and Fred Wiersema published the famous book, The Discipline of Market Leaders. In their study of 80 market-leading companies at that time, they discovered that customers clustered into three categories.
- Those who value lowest total cost
- Those who value product distinction and performance
- And those who value personalized service and guidance
Take a minute and think about the things you buy. Why do you buy from Amazon? Or Apple? Or not Apple? What made you choose to buy the car you drive? What’s your go-to place for a quick meal? Why is that your preferred place?
As you think about the things you buy, there are certain situations in which you value low cost and convenience. There are situations in which you value the best-of-the-best. And there are situations in which you value personalization.
The core argument of Treacy and Wiersema’s book was that the most successful organizations (i.e. the market leaders) across industries excel at delivering a single type of value to their customers — driven by what they called “market disciplines.”
- Businesses that master the discipline of operational excellenceexcel at delivering low cost and convenience
- Businesses that master the discipline of product leadershipexcel at delivering cutting edge and best-in-class
- Businesses that master the discipline of customer intimacyexcel at delivering one-of-a-kind, personalized experiences
I’ve come to think of these “market disciplines” as three Cs: 1) cost-effectiveness, 2) cutting edge or 3) customization.
Now, compare the list of three customer clusters above to this list of three market disciplines. Can you see the connections and correlations?
Bringing Market Disciplines to the Here and Now
At this point, you may be thinking, “That’s interesting stuff Keith, but that was then, this is now.”
Let’s take some of today’s market leaders and see how they stack up against that 1995 research.
Amazon excels at offering a huge selection, at low prices with fast shipping. Walmart and IKEA are similar — big selection, low prices, and convenience. It sure sounds like these brands excel at cost-effectiveness (i.e. the market discipline of operational excellence).
When I think of products and services that are of the highest quality and/or are renowned for their status, brands like Tesla, Mayo Clinic, The Wall Street Journal and Manolo Blahnik, among others, come to mind. These brands are built on cutting edge distinction (i.e. product leaders).
What about brands like Uber and Airbnb? Well, my friend, these brands were built on deep data and sophisticated algorithms that match customers wanting to transport or house people (sellers) with customers needing a ride or place to sleep. In other words, these brands excel at customization and personalization — right time, right place, right person. That requires customer intimacy through data.
Which Market Disciplines Should You Master?
I recently had a conversation with a company president about his strategy for next year. After listening to him describe his team’s chronic struggles to deliver on clients’ expectations, I started to suspect the company lacked a core market discipline.
So, I asked him, “Do your clients most value cost effectiveness, cutting edge or customization?”
He said, “Customization.”
That immediately explained why his team was struggling. His company wasn’t operationalized or optimized to quickly personalize their solution to each client’s unique needs. They were immature with data mining and management. Their turnaround time to go-live was steadily increasing. Which was delaying their cash flow.
The strongest brands — the market leaders —excel at delivering on either cost, cutting edge or customization. They don’t try to master more than one at a time, because it’s too costly. And they evolve with their customers’ values.
Undisciplined businesses (i.e. those that aren’t market leaders) try to be all things to all people. They’re mediocre. And, like grains of sand on a beach, they look like everything else around them.
Choosing the Right Discipline
Whether you’re running a “single shingle” service business or a multi-billion-dollar matrix organization, ask yourself these questions:
- Do my customers most value low cost, cutting edge or customization?
- Are my people, processes and technologies optimized to deliver this primary value?
- Do my operations have the funding it takes to optimize for this value?
According to the authors, operationally excellent companies reject variety, because it comes with heavy costs. They focus on serving high demand middle markets where customers are more interested in cost and convenience than choice.
Product leaders sell what’s new. They sell what’s never existed before. Therefore, they must create markets where none existed, which requires early adopter programs, big launches and other high-cost, massive education investments.
Finally, companies that excel at customer intimacy know their customers’ professional and personal lives better than they do. They are masters of data. They are able to mine insights and scale best practices better and faster than their competition.
When In Doubt, Ask Your Customers
No business can possibly be a premium product/service leader that creates one-of-kind experiences for everyone everywhere at low cost. Yours can’t either.
The good news is you don’t have to. Different customers buy different kinds of value.
The key is to get crystal clear about which your customers most value, and architect your operations around that core discipline. If you’re not clear, get out in the field and ask.
Your customers can have low cost, cutting edge and customization. But they (and you) can only pick one!