RSR Research: The New Disciplines of Market Leaders
Through a special arrangement, presented here for discussion is a summary of an article from Retail Paradox, Retail Systems Research’s weekly analysis on emerging issues facing retailers.
In the early 2000s, as the retail world reeled from the impact of Walmart, I found myself quoting one book with some frequency. That book was The Discipline of Market Leaders by Michael Treacy and Fred Wiersema. Most of you are aware of the model by now. In a nutshell, there are three potential areas of market leadership: Operational Excellence, Product Leadership and Customer Intimacy. Companies must be competent in all three, but the best companies pick one of the three to target as their “core”. (Apologies for an oversimplification, but for our purposes today, this is close enough.) Walmart was clearly the leader in operational excellence. Its mass and super-efficient supply chain made it the low cost provider.
Most of my writings and speeches in those days exhorted retailers to stop trying to compete with Walmart on those terms, and to stake out one of the other two areas for their own. In fact, I believed product leadership was attainable by a rare few, so retailers would be better off focusing themselves on customer intimacy. This was my recipe for success in what I called “The Post Walmart World.”
Last week, as I listened to yet another person cite the Treacy/Wiersema model, I was struck by how much times have changed. The omni-channel phenomenon has rendered it obsolete. Walmart remains operationally excellent, yet its comparable store sales have been flat for more than two years. When we look at the Apple phenomenon, it’s hard to cite an area where the company does not excel. Great products, an excruciatingly efficient supply chain, and customer service that boggles even this pain-in-the-neck customer’s mind. And so I wonder if in fact all three disciplines have been reduced to table stakes.
In an age of social networks, price transparency, and cross-channel shopping patterns, what are the right disciplines for market leaders? What should our new technologies be supporting? I like my RSR Research partner Nikki Baird’s model: the five C’s of omni-channel retailing:
Content: This is all the content that a retailer or brand can bring to bear to influence, enhance or shape the purchasing decision.
Community: All the people that a customer might involve in the purchase decision, whether known or strangers.
Commerce: All the power that a retailer or brand can bring to bear to grab the consumer’s product selection and monetize it — make it a transaction.
Context: Context is all about relevancy. It’s a function of where the customer is in the buying process, and physical proximity to a location where commerce is possible.
Customer: This fifth element is central and, as such, is the big difference between the old discipline of market leaders and the new one. All activities performed by today’s brand managers and retailers must must be focused around the customer.
And the best retailer will excel at all five.
All this is by way of saying I’m retiring my old slide deck. It’s a new world.
Discussion Questions: Has the Treacy/Wiersema model for market leadership become less practical in an omni-channel retail world? What do you think of the five C’s of omni-channel retailing?
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9 Comments on "RSR Research: The New Disciplines of Market Leaders"
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Nikki Baird has done an excellent job at updating the Tracey/Wiersema model to reflect the current realities. As Paula notes, customer is the key. There is no time in history where there has been more power in the hands of the customer. The winners must understand the diversity of the customer population, identify which customers offer the biggest opportunity, and then work backwards from there. With the options available to the consumer, we have left the world of “push” technology and moved completely into a “pull” world.
I’m not sure I want to declare the Discipline of Market Leaders irrelevant just yet, but I do like the Five C’s of Omni-Channel Retailing (but it needs a better name). It seems to apply to all retailers regardless of size and channels. I especially like the notion of context since that’s becoming more important with the rise of mobile.
When I first read this article I thought “That’s complicated.” After reading it again, I still thought it was complicated, but this time I realized that it is true. Gone are the days when being good at one thing is enough. To be truly a market leader, a retailer has to get it all right.
Paula is correct in her assessment that the customer is the central element and the big difference between the old and the new market discipline. The omni-channel phenomenon has given the customer unprecedented access to brands and put them in control.
Surviving old and new retailers will understand and embrace this new model or die trying. Retail is complicated.
The five C’s model is spot on. I think Nikki not only identified the elements that comprise the new world, she has, in essence, challenged every retailer in the country to begin managing a much more complex shopping environment.
The market influences and retail choices are many — therefore the operator that addresses all of these C’s will have the greatest opportunity for success. For those that elect to stick to old approaches will likely not survive.
There is indeed a new model for market leadership and this model from RSR pretty much nails it. In particular, I love that that Customers is at the very center. One thing, however, is missing, and Paula and Nikki should like it because it’s also a “C”: Climate. Everything a retailer does, and any other business for that matter, is relative to external factors that include the market (micro or macro) and that other big “C”, the competition.
The article states that Walmart is operationally excellent yet sales are flat-ish. Combined, the five C’s represent a new operational standard, one that Walmart was slow to embrace as it focused somewhat myopically on its physical stores. Walmart has since awakened and smelled the omni-channel opportunity and things tend to happen when the giant wakes up. I’m betting that @walmartlabs will postpone “post Walmart.”