Wednesday, June 29, 2005

Discipline of Market Leaders

I just got done reading "The Discipline of Market Leaders" by Michael Treacy and Fred Wiersema. The book came out in 1995 but a lot of thoughts and theories outlying in the book still hold true. I highly recommended this book if you care about the success of your company. Here is an example of a review of the book from Bizsum site.

The book focuses on 3 type of organizations:

  • Operational Excellence: lowest price with hassle free service. Wal-Mart is an example of this type of organization
  • Product Leadership: pushing the limit of product boundaries. Intel, Sony, and Nike are these kind of companies
  • Customer Intimacy: delivering exactly what customers want and more. Interestingly enough the book uses the old IBM of the 70s as one of the examples

My current company follows the Customer Intimacy model. With this model, we chose to have a smaller set of customers but we become an extension of those companies. Our account managers are treated as part of our customers' teams. Because we are a technology company, we often have to mix in Product Leadership to keep our customers ahead of their competition. Our product prices are a little bit higher than others but our customers prefer to work with us since at the end, the total cost of ownership (product pricing, services, support, leadtime, flexibility, etc.) come out to be the lowest. I have worked in other organizations where Product Leadership is the focus and I think the Customer Intimacy is the trickest, especially in the high tech industry, where ones tend to fall for the most tricked out, uber-tech products.

It helps for the organizations to recognize where they want to be and model their businesses after it. I consulted with a company in the past where they wanted to be the Customer Intimacy but they structure their business model after Operational Excellence, the low cost leader in their industry. They ended up with negative gross margin and unhappy customers. The company is still struggling the last time I checked.

In conclusion, the book is a must read. Besides it is a very easy read and most case studies in the book associated with well known companies. Go out and get one!!!