Digital Disciplines - Wiersema Fred

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most pertinent to these customers – such as best total cost, best solutions, or best products. On top of that, they recognized the imperative to provide better value year after year in order to sustain their appeal to ravenous and switch-prone customers – whether through faster, cheaper, and better offerings, special treatment, or otherwise.

      Then as well as now, customers want more – and they want to be delighted and surprised. Today nothing has more power to surprise than the digital juggernaut that is transforming marketplaces around the world.

      In my research 20 years ago, the Internet barely registered as a crucial component of market leadership. The word internetworking appeared just once in my book, and the term digital did not come up at all. How things have changed. Today, technology is a pervasive strategic force in any market-leading company that I know, and is getting recognized as such in a rapidly growing number of other firms. In light of that, it is no surprise that as of April 2015, the world's highest-ranking companies by stock market capitalization were Apple and Google, with Microsoft, Facebook, Oracle, and Amazon not far behind, and that most of the fastest-growing enterprises can be found in the digital field.

      Considering the rampant growth and importance of digital capabilities, Joe Weinman's Digital Disciplines could not be more timely. The immense merit of his work lies in illuminating how the dizzying array of current and emerging digital technologies are shaping and transforming the ways that companies create better customer value and, hence, attain market leadership. His insights and case studies provide a blueprint for companies of all sizes in all industries to upgrade their strategies so as to compete effectively in the digital era. The connection of his four digital disciplines with the enduring disciplines of market leaders that were outlined in my earlier book is uncanny. To me, Digital Disciplines shows how technology is super-charging the way customer value gets created. Weinman, in effect, is putting my original disciplines on steroids.

      Digital Disciplines provides rich and interesting detail as to technology's potential and impact on customer strategy. Even with a pretty good grasp of the subject matter, I found the book eye-opening, especially in terms of the multitude of possibilities it covers that are worth exploring, and the dangers that could befall those who do not fully appreciate the necessities of the digital era.

Fred WiersemaCustomer Strategist, Chair of the B2B Leadership Board,Institute for the Study of Business Markets at Penn State, andcoauthor of the top-selling The Discipline of Market Leaders

      Preface

      In 1993, two management consultants named Michael Treacy and Fred Wiersema wrote a popular Harvard Business Review article titled “Customer Intimacy and Other Value Disciplines.” They further detailed their insights in the best-selling The Discipline of Market Leaders. Based on a multiyear study of dozens of companies, they argued that to be successful, firms needed to create unique value for customers through operational excellence, product leadership, or customer intimacy.

      Operational excellence focuses on developing differentiated processes, for example, those that offer lower prices or greater convenience. For example, Dell had rethought the PC business, replacing store-based channels that pushed standard make-to-stock configurations with a direct-to-consumer model for assemble-to-order products, increasing convenience while lowering price-points.

      Product leadership involves leading-edge products and services. Treacy and Wiersema highlighted Johnson & Johnson's Vistakon unit, which rapidly acquired the rights to and scaled up production of an innovative disposable contact lens technology branded Acuvue.

      Customer intimacy entails better relationships, driven by a deep understanding of customer problems and a willingness to solve them, enabled by flexible processes, systems, people, and culture. Treacy and Wiersema pointed out that Home Depot clerks are happy to spend whatever time a customer needs to solve a home repair problem; the same for IBM sales teams.

      The insights of the value disciplines approach are as true today as they were then, but the implementation details have changed – significantly. Treacy and Wiersema were well aware of the opportunities inherent in information technology, highlighting, for example, how General Electric used a system called “Direct Connect” to enable independent dealers to utilize a stockless distribution model and sell from virtual inventory, simultaneously giving GE better visibility into customer orders, dealers higher profits, and customers better service.

      However, the IT of that era largely involved enterprise systems. The web was in its infancy and mobile data was nonexistent. Now we live in an era where even three-year-olds play with smartphones and tablets more powerful than the mightiest supercomputers of those bygone times. Today, the Internet permeates our lives, with massive bandwidth increases enabling new services, such as home movie streaming and mobile social networking. Sensors can detect heartbeats and tremors, GPS can track vehicles, the cloud can apply sophisticated algorithms against enormous sets of not just numerical data, but videos, speech, and images.

      This book attempts to answer a simple question: How should the Treacy and Wiersema value disciplines framework be updated for this new world of cloud computing, big data and analytics, social networks, broadband wireless and wireline connections, and smart, connected things ranging from thermostats to jet planes? In other words, how do digital technologies impact value disciplines to become digital disciplines?

      Simply put: Everything stays the same, yet everything changes.

      Better processes can still drive a competitive edge, but mere (physical) operational excellence is no longer sufficient. It must be enabled, complemented, and extended through information excellence, including real-time dynamic optimization algorithms and the seamless fusion of physical and virtual worlds.

      Better products and services are still desirable, but it is no longer sufficient to improve a standalone product. Today, products are not just digital and smart but connect to back-end cloud services, and from there onward to social networks and infinitely extensible ecosystems. The same goes for the physical embodiment of services – for example, healthcare services increasingly involve pills, pacemakers, and equipment connected to patient data repositories, diagnostic systems, and hospital asset management systems.

      Better customer relationships are no longer just about caring, empathetic customer service employees or dedicated account teams willing to spend time on the golf course to get to know the customer. They are also about better meeting each individual customer's needs, by deriving subtle insights based on big data from all customers collectively. Examples include upsell /cross-sell in retail, more targeted recommendations in entertainment, and personalized medicine.

      Finally, in today's hypercompetitive world, innovation is a critical imperative: delivering higher-quality results, faster, and more cost-effectively. Innovation encompasses not just products and services but also processes and relationships, and can benefit from new cloud-enabled constructs such as idea markets and challenges, which extend the innovation team beyond the company to the entire world.

      After researching dozens of firms, the successful ones all seem to have exploited one or more of these themes; the fallen ones have largely failed to do so. Amazon.com versus Borders, Netflix versus Blockbuster, Wikipedia versus Encyclopedia Brittanica, WhatsApp versus telco-based texting, and dozens of other cautionary tales offer object lessons in harnessing information technology to disrupt and reimagine industries and outmaneuver competitors, or be overtaken by those who can.

      This book offers what I hope will be valuable insights to boards and senior executives such as CEOs, CIOs, CDOs, CFOs, and CMOs (chief executive, information, innovation, digital, financial, and marketing officers), middle management, and line personnel in and outside of information technology. It is a book squarely at the intersection of business and technology, yet largely nontechnical. In a world where virtually all consumers are digital natives or digital immigrants, IT is no longer the province of the glass-house datacenter but an important weapon that virtually any enterprise – in business or government – must wield to be successful.

      An implicit theme of the book is that winners win, not just due to random luck, but due to repeatable, structured principles. These principles

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