| Ideas and Solutions - Positioning Why small companies can be a big deal by John Case, The Inc. Report The hot business book these days is "The Discipline of Market Leaders," by Michael Treacy and Fred Wiersema, two consultants associated with Cambridge-based CSC Index. Reading it, I suddenly remembered it was time to get the snow tires off my car. The link between these disparate mental events shows you don't have to be a giant corporate leader, a Federal Express or an Intel, to draw an important business lesson from this big-company book. First off, you have to love a book that begins with questions every businessperson has wondered about at one frustrating time or another. How come Federal Express can deliver every package overnight - yet the airlines can't even keep track of passengers' bags? Why can a Hertz #1 Club Gold member pick up a rental car with no paperwork, while guests at a hotal must fill in the same name-and-address form every blessed time they stay there? Why is a Casio calculator less costly than a box of Kellogg's corn flakes? Why does a cheap Swatch work better than an expensive Rolex? What is a Home Depot hardware clerk (who's selling a few dollars' worth of tools) more helpful than an IBM direct-order salesperson (who's selling a $2,000 computer)? Treacy and Wiersema's answer: The best companies don't try to be all things to all people. They pick one of three "value propositions" - a distinct combination of values they offer the customer - and build their whole company around that. Value prop #1 is operational excellence. That's the Federal Express model: absolutely, positively what you expect, every time. FedEx's technology, systems, and training are all geared to getting those packages to the right place at the right time. For the airlines, bags are an afterthought. Value prop #2 is product leadership. These are the companies like Intel and Swatch that focus on innovation. Product leaders are working on tomorrow's products even as they trumpet today's . Rolex and Kellogg, by contrast, are coasting on their reputations. Value prop #3: Intimacy with the customer. If you're a Lands' End shopper or a Hertz #1 Club Gold member, those companies "know" you - or at least make you feel they do. Shop at Home Depot and you find that every staff member is trained to take the time to help you find what you need. Like most three-part categorizations, this one isn't perfect. Some of the best companies seem to excel on more than one dimension. But the taxonomy helped me understand why the outstanding small and midsized companies that make the pages of magazines such as Inc. stand so far ahead of their competitors. A few years ago, for example, I visited a little company called Electronic Liquid Fillers, in LaPorte, Ind. ELF, as it called itself, made bottle-filling equipment for customers in the packaging industry. Its machines weren't the fanciest. Nor were they the cheapest. Yet the company was astonishingly successful. The secret? ELF could build a machine to a customer's specifications, deliver it, install it and guarantee that it would work right - all within 10 business days. The whole company was built around that 10-day time frame. Orders went straight from sales to production, with no bureaucratic delays. A big parts inventory insured that necessary components were always available. Employees stood ready to work weekends, if necessary, and to fly out for installations at a moment's notice. ELF rewarded them handsomely - so long as the machine was up and running on time. Like Treacy and Wiersema's market leaders, ELF had a distinctive value proposition. Its competitors, who typically took many weeks to build their machines, couldn't duplicate what ELF did - not without transforming their whole operation. And, yes, that brings me back to those snow tires. By mid-April, even a cautious fellow like me can't put the changeover off any longer. But that's OK, because I can get it done free. My tire supplier builds its business around long-term customer relationships. When I bought the tires, I "bought" free changeovers for the life of the tires. I also bought the quickest, most hassle-free service around. If you don't want to leave your car there all day, they'll turn it around in an hour. If you do, you can sign up for a free "loaner" car. If anything happens to the tires, they'll be replaced instantly, no questions asked. Sure, the tires cost a little more. To me, it's worth it. It might not be to everyone - but then my tire supplier isn't trying to sell to everyone. ELF, my tire supplier, and hundreds of other stellar small companies may not have the name recognition of a Federal Express. Doesn't matter. In their little markets, they're leaders. (John Case is a senior writer at Inc. magazine. The Gold-hirsh Group Inc. Hi s Internet address is: john_case@incmag.com.) |
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