Structuring Your Organization around the Value You Deliver

For many organizations the end of the year is a time to look and see if your strategies, tactics, and structure line up with your vision.

One of the top resources that I have found in helping an organization focus is a book by Michael Treacy and Fred Wiersema, The Discipline of Market Leaders. I read it many years ago and still refer to it today.

They write, “The message . . . Is that no company can succeed today by trying to be all things to all people. It must instead find the unique value it alone can deliver to a chosen market.”[1]

To help organizations do this analysis, they divide organizations up into three different types of “value disciplines”. The opportunity for us as we plan is to determine the value discipline that best fits the strategy for our organization and then use the characteristics of that discipline to help in building staff and structure.

Here are some highlights of each of the three value disciplines.

1. Operational Excellence (examples Wal-Mart and McDonalds)

• Value Proposition: Best Total Value
• Golden Rule: Variety kills efficiency
• Business Structure: Standardized, simplified, tightly controlled, centrally planned, little discretion for rank and file
• Culture: Abhors waste and rewards efficiency
• People: Team counts, not individual, train them our way

2. Product Leadership (examples Intel and 3M)

• Value Proposition: Best Product
• Golden Rule: Cannibalize your success with breakthroughs
• Business Structure: Loosely knit, ad hoc, ever changing so as to adjust to entrepreneurial initiatives and redirection
• Culture: Encourages individual imagination & accomplishment
• People: Get the talent

3. Customer Intimacy (examples Nordstrom and IBM)

• Value Proposition: Best Total Solution
• Golden Rule: Solve the customer’s broader problem
• Business Structure: Delegate decisions to employees close to the customer
• Culture: Embraces specific (not general) solutions and thrives on deep and lasting customer relationships
• People: Stay at forefront and learn – broad skills and styles

Which value discipline do you identify with of the three? The structure you build will be very different based on where you focus.

[1] The Discipline of Market Leaders: Choose Your Customers Narrow Your Focus, Dominate Your Market by Michael Treacy and Fred Wiersema, page xiv