Business Case Studies, Executive Interviews, Michael Treacy on Innovation

Tell A Friend

Executive Interviews: Interview with Michael Treacy on Innovation
November 2006 - By Dr. Nagendra V Chowdary

Michael Treacy
Co-founded GEN3 Partners

Download this interview
  • It's almost 13 years since you wrote the path-breaking article, "Customer intimacy and other value disciplines"(HBR, January-February 1993). Do you think the three value disciplines that you have proposed in the article (as well as in the book, The Discipline of Market Leaders… ) still hold good or are there any new insights?
    There are indeed new insights but the core ideas that supremacy of customer value and trying to shape business strategy and the idea that there are three fundamental choices you can make between low price, thought leadership and developing a total solution still hold true. What also holds true

    is the central connection between your value proposition and if it's modeled in time. Those fundamental tenets have stood the test of time quite well.

    What is new is that we have a much deeper understanding of the value discipline around customer intimacy and total solution. Over the years we have come to develop a much deeper and clearer understanding of what that really means.

    Another element is that in the past 13 years technology has changed. Organizations have created new operating capabilities and there are all kinds of ways that people can extend out further their operating model or design. So what we have seen is an ever-increasing performance against all the dimensions of value that are taking place simply because innovation opens up all sorts of new ways of delivering value in ever-more effective fashions.

  • It's one thing to choose one of these three disciplines and operating on that platform. It's quite a different thing to bring about innovation in each one of these disciplines. What is the best way to have a balance between the value discipline chosen and the innovation desired?
    In the past few years we have actually made enormous headway studying the connection point between the value that's chosen and the kinds of innovation needed to create. What we have learned is that it starts with a much clearer understanding of what is innovation. In the past, if you listened to people talk about innovation and you tried to find the real definition, it remained a very loose concept in most people's minds. It just seemed to have something to do with being different or better, changed or with more variety.

    Let me give you a definition of innovation that is actually central to progressing. Innovation is a significant improvement along the main parameters of customer value. By example, let's say we are in the breakfast cereal business. The way breakfast cereal folks tend to innovate is they take some combination of oats, wheat and corn; they grind it up, make it either into a flake or chunk, and paint it any color in the rainbow. They can add no sugar, some sugar or a lot of sugar. They can place in tried fruit or marshmallow. They put it all in the liner, box it up and charge five dollars. And they call that innovation. Now, if you then apply the definition I gave you, which is innovation is significant improvement along the main parameters of customer value, the starting point instead becomes not the components of the product or different ways to put things together, but identifying what are the main parameters of value. In the breakfast cereal business there are three: taste, nutrition and price. All the products in that market are bought because they either taste better, they are better for you or they are less expensive.

    By applying this definition you radically reduce the number of things you are working on to only those things that can significantly improve taste, nutrition or price. That is how you create a connection between value leadership and innovation. Now, that example happens to be where the company's value proposition would be product leadership so what we were talking about with taste, nutrition and price two of those three dimensions, taste and nutrition are really aligned with the kinds of things that product leaders improve. In another market, where the parameters of value are different, it might be that what innovation means to you is significant movement along a total solution or significant movement along hasslefree service. The same definition applies no matter what the value is.

1. ICMR Innovation Case Studies
2. ICMR Case Collection
3. Case Study Volumes

Contact us: IBS Case Development Centre (IBSCDC), IFHE Campus, Donthanapally, Sankarapally Road, Hyderabad-501 504, Andhra Pradesh, INDIA.
Mob: +91- 9640901313, Phone: +91 - 08417 - 236672, Fax : + 91 - 08417 - 236674

©2003-2010 IBS Case Development Centre. All rights reserved. | Careers | Privacy Policy | Terms of Use | Disclosure | Site Map xml sitemap