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1.

Introduction to the model


The Value Disciplines model by Michael Treacy and Fred
Wiersema describes three generic values disciplines. These disciplines
are:
1) Operational Excellence
2) Product Leadership
3) Customer Intimacy
In this model the company is meant to choose one of these disciplines,
and act upon on it both vigorously and consistently as their primary value
principle and at the same time perform to an acceptable level in the other
two.

2. Why the model was introduced?


The Value-Discipline Model is a strategic tool that helps enterprises
establish what they want their customers to value them for.

The Value-Discipline Model looks at 3 different areas or value disciplines


in which an enterprise can focus. Each area results in customers valuing
the enterprise in a different way. The three value-disciplines are:

Operating Excellence;

Product Leadership; and

Customer Intimacy;

The 3 basic strategy concepts by Michael Porters were cost leadership,


segmentation strategy and differentiation strategy. Tracey and Wiersema
extend them into value disciplines.

The primary difference between Porters work and the value discipline
model is that Tracey and Wiersema deepened the focus on the customer
relationship by defining the Customer Intimacy value discipline. Porters
focus was market-focussed, Tracey and Wiersema shifted to a
customer focus.

It shifted strategic thinking towards customer-centricity and that view


was becoming more relevant.

3. What is the model?


Tracey and Wiersema proposed that in order to be competitive, an
enterprise must be competent in all three disciplines (the minimum
threshold in the diagram), but to be a market leader, an enterprise must
excel in just one discipline. Treacy-Wiersema further propose that an
enterprise cannot excel in all three disciplines because the basic
enterprise culture, structures, people, facilities, processes and business
models that lead to excellence in any one discipline are incompatible with
achieving excellence in the others.

For example, Operationally Excellent enterprises tend to have a limited


range of products and configurations as this is cheaper to build and
deliver than a vast range of products and configurations typical of a
Customer Intimate enterprise. Tracey and Wiersema thus proposed
that Enterprises must make a key strategic choice about which value
discipline to select.

The Value Disciplines:

1. Product Leadership

Product Leadership is characterized by products that are the best in their


market and highly valued by customers.

The principles of a product leadership enterprise are:

Encouragement of innovation a culture that fosters


experimentation and innovation and rewards product or service
improvement;

Risk-oriented management style management that allows


the enterprise to take risks and reap the rewards of new ventures;

Recognition that the enterprises current success and future


prospects lie in its talented design people and those who support
them; and

Recognition of the need to educate and lead the market in


the use and benefits of new products or services.
The dimensions of Product Leadership are:

Capability maturity maintaining the level of capability to


deliver products or services and the continuous improvement of
those capabilities;

Intellectual leverage developing and using intellectual assets


for improved product and service delivery; and

Responsiveness minimizing the response and turnaround


times for product and service design and delivery.

Examples of product leadership aligned enterprises: Ferrari, Apple, Nike

2. Operational Excellence

Operational Excellence is characterized by low or lowest price and hassle


free service.

The principles of an operationally excellent enterprise are:

Efficient management of people employees trained in the


most efficient and lowest cost ways of doing things;

Management of efficient transactions maximizing the


efficiency of all parts of a transaction, including the full supply chain;

Dedication to measurement systems ensuring rigorous


quality and cost control, with measurement targeted at finding ways
to reduce costs; and

Management of customer expectations provision of a


limited variety of products and/or services and managing customer
expectations accordingly.

The dimensions of Operational Excellence are:

Enterprise performance efficiency through improved


processes and automation for speed and hassle-free delivery;

Quality detecting, understanding and removing problems in


processes, products and services that have efficiency impacts both
before and after delivery; and

Cost analyzing and adjusting processes and products to


facilitate the most cost- effective delivery.
Examples of operational excellence aligned enterprises: BHP Billiton, Fed
Ex,

3. Customer Intimacy

Customer Intimacy is characterized by occupying only one (or a few) high-


value customer niches and being obsessive about understanding the
individual customers in detail. Excel in customer attention and customer
service.

The principles of a customer intimate enterprise are:

Having a full range of services available to serve the


customers on demand may involve having a wide range of
services available from other suppliers at very short notice through
contract arrangements; and

A corporate philosophy and resulting business practices


that encourage deep customer insight and breakthrough
thinking about how to improve the customers situation or business.

The dimensions of Customer Intimacy are:

Reach and range location of service access points, number of


channels through which the product or service can be accessed, level
of self-service available;

Cycle time time between awareness of customer need and


delivery, and product or service development time; and

Product identification ability to identify new products or


services required by customers.

Examples of customer intimacy aligned enterprises: Nordstrom, Casinos


(for high rollers), the hair salon.

The authors main premise is that companies must choose and then
achieve market leadership in one of the three disciplines, and perform to
an acceptable level in the other two.

In value disciplines Michael Treacy and Fred Wiersema make the


assumption that an organization will always excel in that which it is good
at.
This value position is determined by the opinion of external parties such
as for example the organizations customers and suppliers

4. Explain the model


5. Illustrations
6. Live examples

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