3 strategic models for market leadership

In 1993 Michael Treacy and Fred Wiersema published an interesting article in the Harvard Business Review entitled "Customer Intimacy and Other Value Disciplines" which discussed the three ways to achieve market leadership adding value to customers. Since then many things have changed, including the concept of added value for the customer, but these three models are still quite applicable at the present time:

Operational Excellence

The aim of the companies that opt for this strategy is to lead its market in price and efficiency. Therefore, they are tireless when it comes to finding new ways to reduce costs, eliminate inefficient production processes, etc. They focus on producing and delivering their products at competitive prices with the fewest number of incidents.

There are many examples of companies focused on operational excellence. Perhaps the best known internationally is Dell Computers and its revolutionary vision of the concept of distribution. Another great example of implementing this strategic model is Graco.

Customer intimacy

This strategy is focused on providing products and services tailored to their customers needs. These kind of companies seek to build a long term trust relationship. This means that they are ready to accept some losses in a particular transaction in exchange for full satisfaction and customer loyalty.

Many of the luxury sector companies apply this strategic model.

Product Leadership

Companies that opt for this strategy are focused on constant innovation of their products and services. Their proposal is consistently the most novel and innovative. These organizations are looking for creative new ideas all the time to add to their business portfolio. They are extremely careful with the quality of their products and very quick in the time-to-market process. The clearest example of this model is Apple.

Success lies in being the best in the strategic model that suits your abilities and your customers

To become a leader in the industry, each firm must choose the model that best fits their skills and culture, also assessing the most relevant features and aspects of its competitors. But make no mistake: the most important challenge is to keep up this model over time, which must guide every strategic and operational decision, and be able to generate the changes needed to go forward bringing coherence and consistency. It is very important to understand that by focusing on one of these models you are also choosing the type of client you are going to have: for example, the typical "customer intimacy model client" will accept to pay more but at the same time will require a lot of flexibility.

But the challenge does not end here. According to our friends at Harvard, for a company to be successful it must be the best in the strategic model chosen and be at least average in the industry  in the other two remaining. Taking Dell as an example again, we’ll see that their main strategy has been and remains operational excellence. But everybody also accepts that their level of adaptation to customer requirements and product innovation is at least the industry average.

And is this also true for SMEs (Small and Medium-Sized Enterprises)?

Of course. I think it is essential that any small business owner reflect on the strategic model and the real position of his/her business. Certainly at the start they may come to the conclusion that SMEs are focused on ensuring the best price through efficient execution, fully adapted to the needs of their customers and at the same time offering the most innovative product. Then they may think: "So why  am I not a leader? Why aren’t my sales taking off? Why can’t I  get to the customer easily? "

It will help a lot to look in two directions: your customers and your competitors. Regarding the first , the key questions that should be asked are: "What kind of clients do I have?, What do they want from me? and what I can offer really? ". Regarding competitors, it is revealing to carry out the same exercise and try to figure out what strategic model is being followed.

How can we do it?

An SME is willing to add more value to customers and advance their competitive position by choosing the right model for their circumstances. To do this, you must follow four steps:

1.  Diagnose: Analyze the strategy followed so far and your competitive position (what you do better than your competitors).
2.  Decide: Choose the strategic model that better fits to your company abilities and your clients. Remember you have to be the best in the application of this model, so your level of ambition must be very important.
3. Be consistent and make sure that every strategic and operational decision to take is aligned with the model you have chosen.
4.   Check at least a couple of times a year, review your action plan to ensure that  there are no significant deviations.

Without doubt, stopping to think about these questions is a very healthy exercise for any organization, but it is especially recommended for those SMEs that are interested in focusing more and better their business. Having a clear strategy helps very much when you have to make decisions and take risks without losing sight of the real objectives of the company. 

(Versión en español, aquí)