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 align with and complement each other. For example, a focus on customer outcomes requires a continuous relationship with the customer, one that is hard to achieve with a standalone product, but one that can be enabled through a connected solution.

The book is structured to be readable from cover to cover, yet each chapter is also self-contained. As a by-product, this necessitates a bit of repetition. The book provides an introduction to some key technologies for those who are more business oriented, and an introduction to some key business strategy concepts for those who are more technology oriented.

The first few chapters provide an overview of the key insights in the book, background on Treacy and Wiersema's value disciplines framework and related strategy models, a more detailed overview of the digital disciplines, and an overview of the five key technologies—cloud, data, social, networks, and things—which, together, are the enabling platform for this new wave of competitive strategies.

Following the introductory and overview matter, there are four main sections, one to address each of the four digital disciplines: information excellence, solution leadership, collective intimacy, and accelerated innovation. Each section has three chapters: an introduction or refresher on essential background ideas such as Porter's Five Forces model or the elements of innovation, the key themes and trends defining the discipline, and a specific case study. Case studies for Burberry, Nike, Netflix, Procter & Gamble, and General Electric provide real examples of how companies are applying the disciplines.

Because successful execution and customer adoption happen largely through people, two chapters focus on human behavior and gamification; one addresses general principles, the other provides a case study on Opower, a company that is heavily leveraging principles of human motivation in conjunction with information technology to simultaneously achieve customer, business, and societal objectives.

Finally, as with any initiative, there can be challenges and caveats in successful implementation. These range from strategic alignment and project management to concerns over privacy and security.

Technology marches forward. Twitter, Facebook, Instagram, WhatsApp, Snapchat, iPads, iPhones, and many of the other elements of the modern digital age didn't exist a few years ago, and change is speeding up, not slowing down. The last chapter addresses technologies on the horizon, and offers thoughts on how to apply the book's insights.

I have attempted to capture the intent of what Treacy and Wiersema eloquently and insightfully articulated, but it's hard to interpret one's own thoughts two decades later, much less someone else's. Any errors or misinterpretations are, of course, my fault.

It is a standing curse on books like these that companies that are held up as paragons can succumb to market turbulence, which has done nothing but increase, in no small part due to information technologies. In fact, during the time it took to write this book, the companies highlighted have adjusted strategies, divested brands, made acquisitions, discontinued products and initiatives, and faced new global competitors. However, the case studies represent a point-in-time snapshot of the issues, approaches, and successes of real companies facing turbulent markets, applying the strategies herein.

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