Value Disciplines
(Treacy and Wiersema)

Trying to be leading on operational excellence, product leadership or customer intimacy. Explanation of Value Disciplines of Treacy and Wiersema. ('94)

Value Disciplines model - Treacy & WiersemaFour New RUles

According to CSC Index consultants Michael Treacy and Fred Wiersema in "The Discipline of Market Leaders", there are four new rules that competing companies must obey.

  1. Provide the best offer in the marketplace, by excelling in one specific dimension of value. Market leaders first develop a value proposition, one that is compelling and unmatched.
  2. Maintain threshold standards on other dimensions of value. You can't allow performance in other dimensions to slip so much that it impairs the attractiveness of your company's unmatched value.
  3. Dominate your market by improving the value year after year. When a company focuses all its assets, energies and attention on delivering and improving one type of customer value, it can nearly always deliver better performance in that dimension than another company that divides its attention among more than one.
  4. Build a well-tuned operating model dedicated to delivering unmatched value. In a competitive marketplace, the customer value must be improved. This is the imperative of the market leader. The operating model is the key to raising and resetting customer expectation.

What are Value Disciplines? Description

Treacy and Wiersema describe three generic value disciplines in their book. Any company must choose one of these value disciplines and consistently and vigorously act upon it. As indicated by the four rules mentioned above.

  • Operational Excellence. Superb operations and execution. Often by providing a reasonable quality at a very low price. Task-oriented vision towards personnel. The focus is on efficiency, streamlined operations, Supply Chain Management, no-frills, volume is important. Most large international corporations are operating out of this discipline. Measuring systems are very important. Extremely limited variation in product assortment. But see: Reverse Positioning.

  • Product Leadership. Very strong in innovation and brand marketing. Company operates in dynamic markets. The focus is on development, innovation, design, time to market, high margins in a short time frame. Flexible company cultures.

  • Customer Intimacy. Company excels in customer attention and customer service. Tailors its products and services to individual or almost individual customers. Large variation in product assortment. Focus is on: CRM, deliver products and services on time and above customer expectations, lifetime value concepts, reliability, being close to the customer. Give decision authority to employees that are close to the customer. Compare: Customer Relationship Management.

The Value Disciplines model is quite similar to the 3 generic strategies from Porter (Cost Leadership, Differentiation, Focus). However there is at least one major difference: according to the Value Disciplines model no discipline may be neglected: threshold levels on the 2 disciplines that are not selected must be maintained. According to Porter, companies that act like this run a risk to get "stuck in the middle".

 

Book: Michael Treacy & Fred Wiersema - The Discipline of Market Leaders -

 

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Recent User Comments
Mohd. Yaseen Khan - IMS Dehraqdun India Value discipline vs. value proposition "What is the difference between a value discipline and a value proposition?"    17
Sandy Palmer - UK Value Discipline Process? "Hi, I'm looking for a generic process to implement value disciplines thinking in a company. Who has some experience? Thanks --"    3
Boris - Switzerland What customers are willing to give up "Note that operational excellence (low cost, no-frills) competitors may know perfectly well what their clients want, but even more what they are prepared to give up in exchange for a lower price. Classic examples are Ryanair and ING Direct. Source: "The customer is not always right | Examining low cost competition" by Professor Adrian Ryans."    10
Cris - Romania Value Discipline "Be careful for the trap to get "stucked in the middle" in the effort to install concomitant high levels for each value discipline. I guess it works here the saying: "Don't run after many rabbits at the same time; you might catch none.""    8
Jacky - US Operational Excellence "Isn't it so that almost all large corporations are opting for the operational excellence strategy? I find it difficult to mention more than a few examples for the other two. Perhaps the Product Leadership and Customer Leadership strategy are either for niche players or for temporary use."    -8

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  ●  (Netherlands) Value Proposition "A value discipline is a STRATEGIC orientation, describing how a COMPANY will provide value to its customers. A value proposition is a MARKETING statement, that clearly states why a customer should buy a particular PRODUCT OR SERVICE. Both are about realizing value, but the levels are different."

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  ● Dieter Huber (Deutschland) Value Discipline implementation steps "Hi Sandy, consider this to get started - adjust were needed!
1. Analysis of current situation [a Collect key customer views, b Analyse current customer base, c Market Research, d Benchmark competitors
2. Explore the three options in board
3. Determine initial strategic preference
4. Analyse costs, benefits, risks, and internal consequences of moving to strategic preference
5. Discuss 4 and adjust initial strategic preference if needed
6. Detailed implentation plan and detailed costs, benefits, risks analysis
7. Go / No Go
8. Implement and monitor progress"
  ● Pradeep Deo (India) Management's Actions "Value discipline in a company comes when management's actions are consistent, logical and transparent. Where constant communication with employees is a way of life. Where philosophy of purpose is followed rather than complex rules and procedures."

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  ● Carlos (Spain) Value Disciplines nurture another "It's very difficult to split each of the 3 disciplines and only concentrate on one as in fact one nurtures the other. Take as example innovation: if you keep innovating without having operational excellence and customer intimacy you may get into purely theorical developements."

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  ● Don (USA) Value Discipline "I don't think the authors are suggesting chasing all three rabbits, but rather to strive for parity against competitors in the two subordinate disciplines that one has risk exposure to."

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  ● Dave (US) Operational Excellence "I would point out that Nike and Intel are product leaders. Just because they are large doesn't make the value they present automatically operation excellence."
  ● Paul (US) Operational Excellence "Jacky, I think your comment is just evidence of the importance of all three disciplines. While we might not be privy to a corporations strategy, it would appear that you could make an argument for all three value disciplines being the primary for most companies we would view as being successful or well managed."
  ● birhane (south korea) operational excellence "I think Dell is a good example of customer intimacy and pfizer is a product leader and probably BMW is also a product leader..."
  ● Pamelah (USA) Operational Excellence "Jacky, there are great examples of large and small companies in each category. Product Leaders are the "wow, what will they think of next" companies like Apple or Microsoft. Customer Intimacy leaders are the "I can't believe they go to that length for their customers" companies like Nordstrom, L.L. Bean, Martin+Osa, or Four Seasons. Harley-Davidson might just have a reputation for both."
  ● James W (US) Pamelah comment "Pamelah, That's the point of the Treacy/Wiersema argument: True leaders do not have a reputation in more than one category. Harley Davidson is mentioned in the book as being a product leader. People want their product years before they are released. Parity in operational excellence and customer intimacy is important, but HD (and other product leaders) truly excel in providing the next great leap forward in their space. And no, Jacky, true operational excellence is sought by few companies. It's very, very hard to save your way to profitability."

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