The basic thesis is that companies cannot be excellent at everything and successful companies became so by focussing on one aspect to really excel in. Other aspects need to achieve at least a threshold value. It was defined in a book by Treacy and Wiersema in 1995 – “The discipline of market leaders”.
The three dimensions they featured were:
- Operational Excellence (OE): Lowest overall cost to customer (not necessarily lowest purchase price)
- Product Leadership (PL): sustainable process for delivering ongoing innovation to maintain position of best products
- Customer Intimacy (CI): Not just addressing general needs of a market but addressing the individual needs of a customer and being able to do so over a sustained sequence of transactions to form a trusted relationship
It is one of the most widely used business frameworks. But – given that all models are wrong but some are useful, how useful is the model?
Consider the following questions:
- Is prioritising within a framework of MECE directions a profitable exercise?
- To what extent are OE, PL and CI MECE?
- Are OE, PL and CI the best set to use? (are they now? were they ever?)
Is prioritising within a framework of MECE directions a profitable exercise?
If you accept that an essential part of strategy is making choices (see Strategy requires we make ‘un-choices’), then we need to have a frame of reference in which to consider what the focus should be is needed. The frame of reference represents the domain of choices and strategy formation includes making choices within that domain. So – if focus is a good idea, then having a model that describes the possibilities of where to focus is also a good idea.
To what extent are OE, PL and CI MECE?
To be a useful frame of reference, it needs to be able to describe the range of possibilities. Each of the dimensions needs to be distinguishable and collectively they ought to describe the range of possibilities.
There are many descriptions of the value disciplines (it was a very popular and widely used framework) but many were not very faithful to the original. In the introduction they explain that the work is based around three concepts :
- The Value Proposition
- The Value-Driven Operating Model (to support delivering against that Value Proposition)
- The Value Discipline – which is how the value proposition and the value-based operating model can be combined to deliver market-leading performance.
In their words, each discipline “produces a different kind of customer value”. The disciplines are as distinct as the kinds of value they support. Whilst perhaps not strictly mutually exclusive, the three types of value are different and they can be combined[1]. Although perhaps not completely exhaustive, the three value propositions (and associated supporting operating models) can be usefully applied across a broad range.
In each case the value proposition of what might otherwise be a single transaction is supported by how the whole company works to form a sustainable capability.
Are OE, PL and CI the best set to use? (are they now? were they ever?)
In my experience the value of applying frameworks such as this (and others – see also Value Configurations) is not to decide which of the defined axis to choose but to explore the implications of possible different emphases to enable a more informed synthesised choice. As such, it is more like scenario planning than either visionary planning or optimisation planning (see horizons of uncertainty).
I have found that the Value Disciplines is a robust framework and provides at least some insight across many situations (but is not rich enough to be the main framework for strategic planning). I found the Value Configurations framework to give more insight.
[1] Like using axes in a coordinate system to create any vector