Even more than in the past, companies that now face global competition must have a viable strategy for succeeding in the marketplace. A strategyA “game plan” that enables a company to attract customers by distinguishing itself from competitors. is a “game plan” that enables a company to attract customers by distinguishing itself from competitors. The focal point of a company's strategy should be its target customers. A company can only succeed if it creates a reason for customers to choose it over a competitor. These reasons, or what are more formally called customer value propositions, are the essence of strategy.

Customer value propositions tend to fall into three broad categories—customer intimacy, operational excellence, and product leadership. Companies that adopt a customer intimacy strategy are in essence saying to their target customers, “The reason that you should choose us is because we understand and respond to your individual needs better than our competitors.” Ritz-Carlton, Nordstrom, and Starbucks rely primarily on a customer intimacy value proposition for their success. Companies that pursue the second customer value proposition, called operational excellence, are saying to their target customers, “The reason that you should choose us is because we can deliver products and services faster, more conveniently, and at a lower price than our competitors.” Southwest Airlines, Wal-Mart, and The Vanguard Group are examples of companies that succeed first and foremost because of their operational excellence. Companies pursuing the third customer value proposition, called product leadership, are saying to their target customers, “The reason that you should choose us is because we offer higher quality products than our competitors.” BMW, Cisco Systems, and W.L. Gore (the creator of GORE-TEX^® fabrics) are examples of companies that succeed because of their product leadership. Although one company may offer its customers a combination of these three customer value propositions, one usually outweighs the others in terms of importance.³

³ These three customer value propositions were defined by Michael Treacy and Fred Wiersema in “Customer Intimacy and Other Value Disciplines,” Harvard Business Review, January/February 1993, pp. 84–93.