A company who hit a business downturn contacted me, seeking my help with improving their alignment and efficiency. The deeper I dug I realized this was not an alignment issue. It was an identity crisis.
The company had grown quickly. Their rapid success had the company running to keep up, and the inflow of money hid problems. Money does that. When the money receded it revealed a gully filled with inconsistent decision-making, micromanagement, silos, misalignment, and a weak culture.
The company was struggling with its identity. It had never decided what type of business it wanted to be, and didn’t know what it needed to focus on to deliver more value to their marketplace. In fact, they had become so confused it would not be untrue to say they were selling one thing and delivering another – and didn’t know how to fix it.
The most successful companies select a value desired by their market, identify a way to deliver it better than their competition, and maintain their competitive advantage by increasing its value faster than anyone else.
In “The Discipline of Market Leaders,” authors Michael Treacy and Fred Wiersma propose that companies must choose between three value propositions, Product Leadership, Operational Excellence, and Customer Intimacy.
- Product Leadership (Best Product) companies offer products that push performance. Advanced features and continued evolution are the strategies used to stay at the forefront, while continuing to command a high price.
- Operational Excellence (Best Value) companies offer the best mix of features, price, and convenience. A competent feature set, ease-of-use, high availability, and a low relative price are some of the strategies used to increase its value.
- Customer Intimacy (Best Service) companies provide their value by focusing on specific customers, not the market. They increase their value by offering services to provide the customer exactly what they want – and they charge them for it.
This is not to suggest the value propositions are myopic or exclusive. Treacy and Wiersma note the need to maintain minimum standards to ensure the performance in other value areas assuring it does not drop so low your overall offering unattractive.
One example of this is customer service.
Great customer service is an important element for every company, but the form and delivery it takes must be tailored for each of the value propositions in order for it to effective and affordable.
Product Leadership companies integrate high service levels to help the customer take maximum advantage of the many and innovative product features. These services might include training sessions, free maintenance or extended warranties, or “loaners” to limit inconvenience to the customer. Product Leadership is the proposition offered by companies like, Apple, Tesla and Google.
- Apple offers the low cost training sessions at their retail stores and a Genius bar for support.
- Tesla has free charging stations across the country and new features through software upgrades downloaded to their cars directly via the Internet.
- Google takes advantage of their broad Internet infrastructure to provide “free” applications and support.
Customer service for Operational Excellence companies emphasizes high availability, low prices and ease of use with “good enough” quality. Customer service in these types of companies might take the form of a liberal return policy, pre-paid return shipping or extended store hours. Examples of Operational Excellence companies are Walmart, Southwest Airlines, and Ikea.
- Walmart offers customer service with extended (sometimes 24/7) store hours, liberal lay-away policies, and easy returns and refunds.
- Southwest Airlines strikes a balance between cost and convenience declaring the informality and lesser services to be “fun.” As a result they give their team members more autonomy in providing service.
- Ikea provides an attended kid’s area in each of their stores so parents can shop longer and without interruption. Each store also houses a restaurant so there is no need to leave to grab a quick bite.
Customer Intimacy companies invest highly in individualized attention to their customers. Education in features and benefits, and design consultations o ensure the customer gets the result they want. Amazon.com, Nordstrom, and Home Depot are all companies following the Customer Intimacy model.
- com uses their extensive product database and information about your personal shopping habits to make purchase suggestions to you, as well as compatible add-ons once you select a product. And their star rating system with input from other customers help you make a better selection.
- Nordstrom offers personal shopping services, even going so far as to notify you when a favored item is back in stock, or has gone on sale. Each store member has access to your shopping history and preferences for better-individualized service, and is assigned a budget (which is expected to be used) for unanticipated customer service.
- Home Depot associates are experienced in the trades to ensure you will know how to use what you buy. Free project training classes are held regularly to encourage shoppers to take on more projects themselves. Home Depot also has a liberal return policy that encourages shoppers to make sure they get everything they might need the first time.
The type of service a customer most highly values is according to their value proposition for that purchase. Consumers want the best product for some things, best value for others, and are willing to pay for the individual attention of others. And typically identify that before we begin shopping.
When your brand is in alignment with your best fit customer your sales will grow as more find you, your customers will be happier because you are the right fit, and the simplicity it brings to your operational model ensures higher overall profit.
Sometimes companies may change their value proposition as business conditions or other factors change. As an example, Dell Computer’s initial growth was powered as a Client Intimate company offering customized systems to home and business consumers. As they grew they extended in to low price, fixed configurations sold through major retailers like Best Buy and Fry’s Electronics. Now Dell has entered a new phase as they position themselves for Product Leadership in server sales.
Identity is the first step to alignment, and alignment the first to performance.
To learn more about this concept of value propositions and how they will accelerate the performance and growth of your company, read “The Discipline of Market Leaders”, available on Amazon.com.
Or contact me for Client Intimate service.
“Birds of a feather, flock together.”
– Robert Burton
“You keep pushing, and the flywheel begins to move a bit faster, and with continued great effort, you move it around a second rotation. You keep pushing in a consistent direction. Three turns … four … five … six … the flywheel builds up speed … seven … eight … you keep pushing … nine … ten … it builds momentum … eleven … twelve … moving faster with each turn … twenty … thirty … fifty … a hundred.”
– Jim Collins, “Good to Great”