The discipline of market leaders

Choose your customers. Narrow your focus. Dominate your market.

This was Michael Tracey and Fred Wiersema’s promise when they wrote, in 1994, “The Discipline of Market Leaders”.

It became The New York Times Best Seller Non-Fiction book in 1995 and for a good reason: the authors (consultants) came up with a model to win in the market.

Unfortunately, this book lost most of its traction very quickly. Apparently, because top strategy consulting firms felt threatened by the book, so they found a way to discredit it.

This is a real shame, as this book (and the suggested approach to become a market leader) is a real gem. Despite it was written 26 years ago, it’s still perfect for the current time.

In few words, the authors suggested, through extensive market research, that companies that have taken leadership positions in their industries have done so by narrowing their business focus, not broadening it.

They have focused on delivering superior customer value in line with one of three value disciplines:

  • Operational excellence
  • Customer intimacy
  • Product leadership

Let’s define them.

Operational excellence means providing customers with reliable products or services at competitive prices and delivered with minimal difficulty or inconvenience.

Customer intimacy means segmenting and targeting markets precisely and then tailoring offerings to match exactly the demands of those niches.

Product leadership means offering customers leading-edge products and services that consistently enhance the customer’s use or application of the product, thereby making rivals’ goods obsolete.

According to the authors then, you don’t need to excel in all value dimensionsExcel in only one value dimension, but do just fine on the other twos.

Here a good representation:

(From “Business2You”)

In reality, very few organizations understand and apply these principles. Many firms believe they can be highly-valuable across multiple dimensions. They want to be leaders in large markets. In reality, they play catch up with stronger competitors.

To become the leader in your market, stop trying to be great at everything you do. Instead, decide for what value you want to be known for. Then, master it until you become one of the strongest firms in your market.

To summarize, these are the five steps you need to consider:

  1. Choose your customers well
  2. Narrow your focus based on the value you want to bring
  3. Build an organization and a business model able to deliver that value
  4. Become a true master in delivering the value you choose
  5. Deliver just good results on the other value dimensions

If you look at your company, what value do you want to be known for?

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