At this month’s 2024 LBM Strategies Conference, my keynote topic will share insights into “The Disciplines of Market Leaders,” a powerful, but perhaps underrated book by Michael Treacy and Fred Wiersma. Their thesis, first published in 1995, is as relevant today as it was then.
They asserted that highly successful businesses gravitate towards three models of disciplines: product innovation, customer intimacy, and operational excellence. The compelling argument is that an entire organization must be centered around ideal methods to A) create an internal philosophy of success and B) optimize customer engagement.
Product innovation is the practice by which organizations intentionally obsolete (or enhance) their products and service. They become their own best competitor. Think technology and the colossal mistake made by the dominant hand phone manufacturer, Blackberry. At a time when their market share was over 50%, they became complacent while Steve Jobs was screaming at his people to improve Apple products.
Even after leaving Blackberry in the dust, Jobs’ passion for innovation persisted. He is famously quoted (and I’ll paraphrase), after being told that Apple had done it and achieved market dominance, he said “Yeah. And right now, someone is trying to take over. So shut up and build me a better iPhone before someone else does!” Product innovation is the business approach that the world keeps changing and, if you don’t, you’ll be left behind.
Customer intimacy is the notion that you adapt a unique business model for each customer. It is the domain of consulting firms, in particular, who take identical hardware and software available to all organizations and specifically build a unique solution for each customer.
It is the practice of IBM’s Watson, which promises to show you the diverse abilities of a single hardware entity. IBM Watson can design shipping logistics, statistical sports performance analysis, pricing analytics, and more. What’s the promise? Let us look at your business and we’ll design an app around you!
The challenge of customer intimacy, and the real reason for this article, is that you can’t offer a unique business model for every customer. Yet, this is a common practice for LBM salespeople who always want to provide specialized delivery, unique payment terms, and special products outside of the norm. It just doesn’t work when the branch has 200 customers all wishing they can have special favors. Thus, there must be an alternative.
Treacy and Wiersma called this operational excellence. I prefer to call it the franchise model because it emphasizes standardized practices your customers follow to create efficiencies … for them! If a customer asks the local fast-food chain to produce a medium-rare hamburger, it truly is possible the restaurant could try but it would be pure folly. The solution is for the buyer to go elsewhere to a restaurant that offers that level of flexibility. And this is the bugaboo for salespeople. If they can’t tailor a solution for every customer, then they feel little latitude in elevating the customer experience. To this I say, if you can’t sell the standard products and the operational model at your branch, then you’re asking for a lot of problems.
At least one of the three disciplines fits within your organization, and more likely pieces of all three. We have entered an age in which technology is dramatically changing the landscape of customer interaction, and the winners of tomorrow are the ones who innovate today. I would also assert that customer intimacy is a viable model to employ with the large-volume customers that produce enough revenue to justify a specialized cost-to-serve model. Ultimately, the missing link for LBM dealers is the realization that the most effective service model in which they most successfully operate is the franchise model.
Anyone can sell what they don’t have. Show me a salesperson who can sell what they got, and I’ll show you a salesperson that is contributing profitably to your model of operational excellence.
