After Amazon purchased Whole Foods in August of 2017, I wrote about why Amazon will change Whole Foods. Many of the changes that ensued were, in part, covered up by the pandemic. But there was an underlying foundation that wasn’t considered by most people commenting on the transaction at the time, and on Whole Foods’s future.
Only CNBC wrote that the “founding ethos of the companies are as different as a chocolate pop tart and organic oatmeal”. Most others wrote of efficiency changes and opportunities.
Whole Foods employees were told nothing would change, a lie as big and persistent as the check is in the mail.
There is a lesson in the merger. It is the 3 Value Disciplines and how one always comes out on top.
The 3 Value Disciplines
Value Disciplines are the way you deliver value to your customer. Your company’s Value Discipline is a foundational component of your company’s strategy.
Too often, a company’s Value Discipline is assumed. It is simply the way it is. Leadership cannot fathom any other way. It’s all they see. So, in the case of Amazon and Whole Foods, Amazon’s view, as that of the acquirer, was that Whole Foods’s approach was quaint, that Whole Foods didn’t understand the market, operations, and product delivery. They saw inefficiencies where Whole Foods saw customer service and a bespoke experience.
But you can, and should, deliberately choose which of the 3 Value Disciplines you will commit to and follow. And when you do so, it can be a real form of competitive advantage.
As you think about the 3 Value Disciplines, consider who your target customer is and what they value, expect, and feel is important.
The 3 Value Disciplines are:
- Operational Excellence
- Product Leadership
- Customer Intimacy
Operational Excellence
Companies whose primary Value Discipline is Operational Excellence compete on price and convenience, and they rely on lower product costs, lower wages, speed, and convenience to deliver what their target customers want. Companies that successfully execute this Value Discipline generally serve a large number of people, efficiently, and at a lower gross margin.
A few examples of companies that operate under this Value Discipline are Walmart, FedEx, Alibaba, and yes, Amazon.
Product Leadership
Companies whose primary Value Discipline is Product Leadership compete on the next new thing. They innovate and do things differently. They can disrupt an industry.
Past examples of effective Product Leadership are the iPod (1,000 songs in your pocket), Toyota’s Prius (the first mass produced hybrid car), the iPad, the iPhone, Nest, GoPro, and Twitch.
These companies rely on being out in front of the pack. Their target customer often wants the latest and greatest new offering. They want something new. These companies need early adopters to spark interest and get the ball rolling.
And it doesn’t have to be strictly product despite the appellation “Product Leadership”. Companies have successfully navigated the Product Leadership Value Discipline by offering an existing product or service in an entirely new way. Some examples are Airbnb, Uber and Lyft, DoorDash, Spotify, Venmo, and Netflix. They delivered things in a new way that customers wanted.
By operating in this Value Discipline, scale is still possible, but so are higher price points and higher margins. Early adopters are often willing to pay more for the value they perceive and receive, establishing a baseline for future pricing.
But to stay here requires constant innovation to stay ahead of the competition.
Customer Intimacy
Companies whose primary Value Discipline is Customer Intimacy compete on what they do to make their target customer’s experience different, unique, and special. They often customize their product or service to meet the individual customer’s needs. They focus on standing apart from the crowd. And they do it deliberately.
They make their target customers feel cared for, listened to, and important. They feel more relationship focused than transactional in nature.
These are the companies that you hear about in stories of remarkable service, or making things right when something goes wrong, as their front-line employees are often empowered to make decisions that may even “violate” a policy when placing the customer and the Core Values first in that decision.
Examples of companies effectively executing the Customer Intimacy Value Discipline are Nordstrom, Salesforce, Black Lapel, Bentley, Ferrari, Chipotle, and before 2017… Whole Foods.
Which One?
I urge you to be deliberate about the Value Discipline you choose. And then be intentional about how you implement it and make decisions that affect your team and your customers.
Companies who aren’t sure about the Value Discipline they are in, or who profess one and follow another, frustrate their customers and their teams. People see through professed priorities when actions don’t align. We see it every day across multiple organizations. And even though customers may not possess the verbiage to concisely express this in terms of the Value Disciplines, they know when their experience misses the mark. And they go elsewhere.
When you are deliberate about your Value Discipline and are intentional in your decision making and implementation, people – your team and your customers – will know what to expect and will stick with you when you do it well.
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