The document introduces a framework for becoming a market leader based on principles of competitive thinking. The framework is based on two key assumptions: 1) businesses must deeply understand customer wants and competitor reactions, and 2) customers will choose the product that best meets their most important needs as long as it meets their other needs adequately. The framework suggests businesses pick one attribute (e.g. price, design) to excel at while providing fair value on other attributes, in order to become the leader in their market.

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[MUSIC]
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So, in this section, what I want to focus
on is an introduction of a, a
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framework that I think you'll find very
useful for figuring out
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how to think competitively to become a
leader in your market.
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And what I'm going to go over is based on
a, a
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book that was written by Tracy and
Wiersema it's called Market Leadership.
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And its based off of their framework,
although I've adapted
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it some.
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And, the framework or the, well I'm going
to think of it as kind

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of the graph or the strategic tool, is
based on a set of principles.
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These principles have to be true and you
have to
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believe in them in order for this
framework to work.
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And they're very strong principles.
They're very strong assumptions.
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I don't think they're that controversial,
but they're
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not vague, they really are very strong,
and
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in order for this technique to work, you
really need to abide by them.
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And the first one is; that you have to
know your markets.
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Now before I mentioned a lot of, most

3. businesses
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are now in customer fosed market, customer
focused marketing.
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That is the type of marketing most
businesses are doing.
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because most businesses are very
competitive, they're global.
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There's a lot of competition out there and
the only
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way they're going to win in their market
place is to
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focus on the customer.
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So, that's a very important principal in
this framework, it says, in order to
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use this framework, we are going to assume
that you know what your customers want.
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4. And furthermore, you know how your
competitors are likely to react.
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And so what you are trying to do
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is what I mentioned that principle of
differentiation.
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You're trying to find a way to
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provide customer value, better than the
competition.
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And the only
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way you can really deliver this.
Is to know your market.
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So you.
And you can't just guess.
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You have to do market research and you
have to really
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understand what your customers want and

5. how your competition's likely to react.
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So that's the first principle.
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The second principle and this is where
it's pretty, it's a
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pretty defined and pretty It's a definite
assumption that's being made.
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And the assumption says and
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what I've written here is customers have
the final say.
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And what that means is the customers are
going to choose what they want.
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But the assumption is a strong assumption
because
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we assume the customers go through this
decision process.
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They look at all the data and all the

6. values
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and all the attributes and all the
products in the market.
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And, there's so much information out
there.
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That they can't consider everything.
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And, so what they do is they
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kind of chunk a bunch of different things
together into kind of three bundles.
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And the three bundles are.
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One is all sorts of operations factors.
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Which includes price and cost.
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But delivery, service, reliability, those,
all of
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those kinds of things are considered
operational things.
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The other bundle is product features or
designs, so product attributes style,
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innovation, technology and they put that
in another bundle.
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And the third bundle is.
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Whether or not it meets my needs, so is it
customized to meet my needs?
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And what the customers have the final say
says,
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is that customers look at these three,
they kind of classify
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the products into these three bundles and
they kind of give
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them a score in each one of these three
dimensions.

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And then they decide which one
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of those dimensions is the most important
to them and they pick the product
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that's the best on one of those dimensions
and good enough on the other two.
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So, it's says, you can't be pretty good in
all three of them.
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Because then the customer won't pick you
but the customers going to
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pick something not that's kind, if they
care about price they're
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not going to pick something that's kind of
a good price they
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going to go for the lowest price or if
they care about
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design it's not going to be something
that's kind of good design, they're

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going to go for the very best design that
they like the most.
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Or if they care about how much it meets
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their own needs, they're going to go for
something that meets
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their needs the best, as long as the
product
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delivers satisfactorily or good enough on
the other two dimensions.
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So, that's a very strong assumption.
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But if you think about it, it
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kind of approximates the way customers
make decisions.
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If you believe that assumption, that the
customers have the final

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say and they choose the product that
delivers the best on the
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bundle of attributes they care the most
about, that suggests that
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if you want to be the first in the markets
that you serve.
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You better be the best at something and
good enough at the other two things.
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And that should be your market strategy
and once you decide on which
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type of thing you going to be the best at,
the market leader
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at, then that have indications for the way
you structure your business, the way you
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prioritize resources, the way you allocate
resources, the
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type of people you hire into your company.

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It has all sorts of implications for your
business organization so that you can
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deliver total value and total quality and
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guarantee the customer satisfaction on
this dimension.
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So, those are the assumptions.
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Now, before I show you the framework I
have to introduce
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one other concept and this concept is what
I'm going to call, fair value.
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And what I have on the screen here is a
value map.
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And you have on the vertical axis,
relative costs to the customer.
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And on the horizontal axis, relative
benefits.

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And what the map says is that if you offer
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more benefits, customers are willing to
pay a higher price.
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If you charge a lower price,
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customers will expect fewer benefits, as
long as what you offer appears to be fair.
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If you offer something inferior and it's
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not fair value, then customers won't buy
that.
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So it, you won't make it in the market.
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You'll be, it'll be cancelled out of the
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market because you're not offering a fair
value.
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13. And what the framework says is that you
need to offer fair value
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on two of those bundles, but offer
something better than fair value on one
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of the bundles, on the bundle you are
going to be the leader on.
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So if you can imagine a marketplace where
everybody is trying
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to deliver fair value and somebody is
delivering something of superior value.
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Think about what's going to happen in that
marketplace, in a very competitive market.
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Somebody comes out, let's say Apple comes
out with a better design and so the iPad
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comes out and it's a much better design.
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It, it fair price on these other axis, but
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14. there are, their tablet is better than
everything else.
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What happens in the marketplace?
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And what happens is everybody tries to
copy and mitigate the advantage.
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And so what happens is what's perceived to
be fair
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value, that fair value line is not a
static line.
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It's constantly moving up, moving to the
lower
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right as the market gets more and more
competitive.
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So what's fair value is constantly
changing over time.
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So although I say what you need to do
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15. in this framework is to deliver the best
of something
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and state fair value on the other two
bundles,
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the problem is fair value's not a static
constant concept.
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It's constantly changing as a function of
competitive reaction.
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So, with that said as background, here's
the framework.
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And here are the three bundles; one of
them is operational excellence, the
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other's performance superiority, that's
the bundle
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that delivers on product design and style.
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And the third is customer intimacy, which
says give the customers what they want.
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And, you're intimate with customer needs
and you
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try to deliver something that's responsive
to their needs.
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And so the three crosshatches here
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are fair value lines.
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Now I had them drawn symmetrically on this
axis, but it doesn't have to be symmetric.
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What you need to do is, if you want to use
this framework.
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Is in your marketplace, figure out, what
are the
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product attributes that relate to
operational excellence in your market.
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And define that dimension.
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17. So that you understand what operational
excellence is in your market.
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You have to do the same thing, or
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what are the product attributes that
matter to the customer?
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Are they design, technology, whatever it
is,
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what are those attributes and define that
dimension.
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And then you have to figure out how much
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customization is there in your market and
define that dimension.
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That's the first thing you do.
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The second thing you do with this
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framework, is anticipate where fair value
is.

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This is the trickiest part of this
framework.
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What are customers expectations on each.
Think of these
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as axis.
Like an x, y, and z axis.
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And where is the reference point or the
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fair value line on each of these axis
points.
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Sometimes people think about fair values,
the average of what everybody offers.
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Sometimes fair value, nobody offers.
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Like for example, I would say in the
airline
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business, people expect an operational
excellence, constant on time arrival.

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And we know very few airlines
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deliver to that fair value.
But that is.
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What I think people expect and I would
say, most
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of the competitors in the market are below
fair value.
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Sometimes, everybody's above fair value.
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In some mature markets, people don't care
about
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some of the bells and whistles that come
out.
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And everybody's delivering at least what
they need.
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And some people more.

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But people didn't even care about that.
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So figuring out exactly where fair value
is and each of these axis is
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a very tricky thing and you need market
research to do that.
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Once you figure out where your value is,
on these, the next part is to plot, where
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your company is delivering, on each of
these axes relative to fair value.
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Are you above fair value in operations?
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Are you meeting fair value or below fair
value on each one of these axes?
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Then you figure out where you competition
is on each one of these axes and
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then you start playing the market strategy
game.

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You think about a short-term strategy, a
long-term strategy and you figure out
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What should you be doing right now in
order to beat the competition?
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And what you're ultimately looking for in
a long term strategy is to
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be the best at one dimension and good
enough on the other two.
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That's the long term strategy.
In the short term it might be that
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let's say your long term strategy is to be
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customer intimate, but you're not at fair
value in operations.
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So in the short term you might be looking
to hit fair value in
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operations, but in the long term you're

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looking to be the leader in customer
intimacy.
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And once you decide what your leadership
strategy is then
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that has implications for everything you
do in your firm.
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So for example if you are an operational
company and
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that's what you want to be your leadership
strategy, that tends to be a
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very hierarchical strategy that, with
allocation of
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resources prioritized to information
technology et cetera.
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If you are a performance superiority
company, that tends
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to be more of an R and D company.

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You tend to hire kinds of people that are.
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Very innovative, they don't like
structure, they don't
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like top-down organization, you really
need to give
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them a lot of free reign.
And in a customer intimacy, you
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really have to focus on prioritizing
market research, customer
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knowledge and you kind of have a
consulting, a yes culture.
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You have to let the customer come first.
So each, once you decide on your
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leadership strategy has a lot of
implications for the rest of the firm.
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[MUSIC].