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 / Winter 2003 / Issue 33(originally published by Booz & Company)


Best Business Books 2003: Strategy

Treacy shares his personal experience about each growth discipline. For example, he begins the discussion of deeper penetration of existing customers by debunking the overhyped concept of customer loyalty. “Customer loyalty is a contradiction in terms — an oxymoron,” Treacy writes. “If there ever were any customers who would never abandon you for a competitor’s product — as we were all told at our father’s knee — they are nowhere to be found today. Sentimental loyalty doesn’t exist. Companies that have committed to complicated schemes for customer loyalty management don’t have much to show for it.” The oft-cited icons of customer loyalty have in fact achieved limited results: The repurchase rate of Lexus owners is lower than that of Ford pickup owners, Cadillac DeVille owners, and Buick LeSabre owners; Staples, the office supplies retailer, dismantled the complex, expensive system that tracked the purchases of all its customers and substituted simple rebates for its largest customers; since frequent-flyer programs add little to base retention, American Airlines Marketing Services focuses on selling frequent-flyer miles to other companies as rewards for their customers. Even Siebel, the foremost proponent of customer relationship management software, shows limited results from customer loyalty. When an independent market research firm contacted the testimonial companies listed on Siebel’s Web site, “61 percent of the customers were convinced that they had yet to achieve a return on investment after two years with the Siebel applications, which cost an average of $6.6 million over a three-year period.”

It’s easy to criticize Double-Digit Growth because of what it’s not. Treacy doesn’t contribute a new theory, can’t claim the credibility of having analyzed a large mass of data, and offers no tools or new concepts. Some people may complain that the principles Treacy recommends in each growth discipline are obvious. For example, “Companies that grow in new lines of business have three characteristics in common. They know how to: Identify, evaluate, and select new lines of business and potential acquisitions; value and structure acquisition deals; and exert financial, managerial, and strategic control over the acquired businesses.” Would anyone disagree? Treacy’s power is not in offering something unique, but in providing pragmatic wisdom and easy-to-communicate frameworks, as in his previous bestseller, The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market (Perseus Publishing, 1995), written with Fred Wiersema.

Growing by Serving New Needs
The third book, How to Grow When Markets Don’t (Warner Business Books, 2003), by Adrian Slywotzky and Richard Wise with Karl Weber, offers a powerful new concept that can be the basis of any company’s growth strategy: demand innovation. Demand innovation is:

Identifying and serving a series of new customer needs, all focused on the activities that surround the products [your company] sells…. While the product sale may be the culmination of the manufacturer’s efforts, it usually marks the beginning of the customer’s. Think about your own product or service. If your business is typical, your customers spent time, effort, and money figuring out how to use your product, maintain it, finance it, store it, and eventually dispose of it. It may have complex interactions with other products or be used as one input to a complicated process. It may serve more than one user, each with different needs and priorities.

To identify these opportunities for demand innovation, Slywotzky and Wise suggest that you should look for ways to help customers:

  • Improve their cost structure by reducing waste, excess operating and capital costs, and process inefficiencies.
  • Reduce complexity, make better decisions, and speed their own offerings to market.
  • Reduce their risk and volatility.
  • Grow their top-line revenue.
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