RSR Research: The New Disciplines of Market Leaders

Discussion
Nov 01, 2011
Paula Rosenblum

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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Bill Emerson
Guest
Bill Emerson
9 years 6 months ago

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.

David Dorf
Guest
9 years 6 months ago

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.

Marge Laney
Guest
9 years 6 months ago

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.

Dave Wendland
Guest
9 years 6 months ago

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.

Phil Rubin
Guest
9 years 6 months ago

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.

Ryan Mathews
Guest
9 years 6 months ago
At the risk of tooting my own horn here, Fred Crawford and I addressed much of this argument in our 2001 book “The Myth of Excellence” in which we argued that it was the elements of a transaction (access, experience, price, product and service) that needed to be focused on rather than broad areas like Operational Excellence. It is, by the way, a taxonomy that doesn’t need to be adjusted in an omni-channel world. It was written with online in mind and still works well when you add in social networks and mobile media. We also raised the context and content argument and the need to put the consumer in the center. With respect, much of this seems old hat except for the suggestion that one should try to be good at everything. We proved (and have proved almost innumerable times since) that in fact being good in all areas is a mistake. So … if anyone is interested in a ten year version of this idea, feel free to order a copy of “Myth”… Read more »
Carol Spieckerman
Guest
9 years 6 months ago

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.”

Mark Price
Guest
Mark Price
9 years 6 months ago
I completely agree with the enhancement of the 3-compentency model into 5 key aspects. Content, Context and Community are so different than the traditional approach to marketing that marketing leaders are being challenged every day. How can they maintain short-term revenue growth in an environment where long-term success is defined by these three new competencies? Successful marketers will be skilled multi-taskers, with ability to shift from promotional planning to social media and content generation, curation and management in a single day. The one place where I would enhance this approach is in context. More and more, the traditional sales process is disappearing, and prospects are seeking out their own sources of information to make their decisions. Even then, the “process” seems to be fluid, where prospects are constantly revising their approach and criteria for success until they are finally ready to “push the button” and proceed with a supplier. For companies to succeed, they must provide content, and become the trusted source of information. After trust is built, then when the prospect is ready to… Read more »
Ralph Jacobson
Guest
9 years 6 months ago
It’s always nice to have a simple diagram and/or convenient keywords to help remember a thought, however, there are some pieces that may help complete the picture, in addition to those already mentioned in the insightful comments, above. The word “content” touches upon the idea of the “brand” of the retailer, however even “brand” can mean the name of the store as well as the private label products they carry. Brand value is an increasingly important attribute for retailing, as you begin to think of the strongest retail brands out there (Apple, of course, etc.). I think there should also be a further dissection between the “customer” and the “consumer.” Especially as we dive deeper into social commerce. Also, geography, “glocalization,” partnerships, revenue model innovation, shopper analytics, integrated information, innovation, channels (there’s another “C”!), inventory, etc. Are those captured in the model described? Perhaps. However I think some of those are a stretch. Perhaps we tried too hard to come up with words that began with the letter “C” and we lost some of the… Read more »
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