The value disciplines of Treacy and Wiersema
Tracy and Wiersema came up with the concept of Value discipline, which is a strategical approach to growth.
The basic idea of the Value discipline is that a company cannot be all things to all people. Each company has to choose a value proposition in which it will excel, and, double down on that to establish market leadership.
Every good business should have a value proposition, an operating model and a value discipline. And to build this, there are three distinct choices to choose from. Product leadership, Operations or Customer intimacy.
Treacy and Wiersema say that there are three generic value disciplines that enable an organization to deliver value to its customers, in what they define as Value Framework.
The framework says that an organization can grow by offering extremely high quality products, or by being operationally effective or through extraordinary customer service. But not all.
Depending on the target customer segment, only one of these value might be of extreme importance to the customer. For example, a customer looking for lowest cost, does not care about product quality that much.
Reference: The value discipline Model by https://www.business-to-you.com/value-disciplines-customer-intimacy/
A look at some of the popular brands that align themselves under these categories:
Product leadership - Apple, Tesla, Gucci, Nike
Operational Excellence - Southwest airlines, McDonalds, DELL
Customer service - Amazon, Zappos, Home Depot, Nordstrom
Product quality as a competitive strategy involves high speed and massive innovation in products. This requires heavy R&D investments & and unquestionable product leadership built through unwavering focus on product supremacy over anything else. The culture of such companies is “Challenge Status Quo”
Tighter operations begin with managing supply chain, efficient sourcing and stocking, eliminating wastes, and continuous rigor in review of product/services strategies. The end game of this approach is to cut costs and pass price benefits to the end customer. The business should be so agile that when one approach fails, switching over to another one should be simple. There is investment in processes but not the product. The culture of such companies is “Optimize what you do”
For example, a typical restaurant procures its raw materials from a supplier that provides for it at a cost lower than anyone else. If, however, a new entrant that is able to provide at an even lower price point, switching vendors is a given. Lower cost is about squeezing costs and passing the price benefits to the user. Not everyone can master this game. It involves bringing some massive puzzles together.
The third approach, which is purely based on customer service and customer experience is neither product nor price, it is simply human. The culture of such companies is “Customer is the boss”.
Treacy and Wiersema recommend that it is impossible for a business to deliver value on all 3 fronts, but they rather choose A customer segment, narrow down the focus and deliver on one of these.
This is a strategic decision that companies should make to beat competition.
However, one discipline that could benefit from choosing a model of not picking one, but all of it to grow and flourish is Customer Success. Customer Success is positive customer experience delivered by meeting expectations on product, operations and support even if the business chooses to dominate by picking one leg of the value triangle.
Therefore, we recommend an approach for all companies where customer experience is a derivative of all 3 elements - Product, Operations & Support and build supremacy from customer experience OR customer success.
In a pure SaaS based business model, customer experience is the real deal keeper. In a pure software only play, unlike the traditional manufacturing OR retail business that the value consulting was built for, no one element can be left behind.
When a customer enters into a SaaS based business model, subscription plays at the top of their mind. Monthly/quarterly/annual renewals put extraordinary powers in the customer's hand to cancel the contract if things do not work out. The deal is just as good or bad as the last customer experience.
To deliver great customer experience, we need to define and track metrics.
Can customer experience be measured?
The usual metrics related to customer’s continued business, such as, Net dollar retention, Net promoter scores etc are outcomes of a good customer experience. But they do not really reflect a good customer experience delivered.
Then, what metrics are they?
Customer experience starts with the product, grows with services built around it and solidifies with a good partnership. By doing so, one realizes the end goal of making the customer your most vociferous advocate through extraordinary customer experience.
A good customer experience is born out of the intersection of all 3 realms of the value consulting framework.
Product Metrics:
The quality of the product - Basic failures, product regressions, outages etc
User experience and self servicing product
It “JUST” works, forever
Features not available in competitive offering
Performs better than the best (Supremacy)
Operational excellence Metrics:
On time delivery
Competitive pricing
Contractual commitments
Supply chain efficiencies & Optimization
Speed of operations
Avoidance of waste
Low inventory
Customer Support Metrics
Time to respond & resolution
Value consulting
Service SLAs & KPI
Proactive maintenance and defect prevention
Integration with support channels (chat/email/phone) and 24x7 availability
Dedicated relationship partner/account management
Companies should therefore hold Product, Operations and Customer Support teams accountable to deliver an extraordinary customer experience by systematically tracking customer experience as a success criteria and measure on these metrics in every business review.
Goes back to the same point. Customer success is everyone’s business.
Agree? Write to me: subhashrinivasan@gmail.com
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