Next Leader

« Back to Glossary Index

A competitor or product that offers much better than industry-standard performance for a low price to a specific subset of the industry customers. A Next Leader can do this because it has a low cost structure (abbreviation: NL). (See also Performance Leader, Price Leader , Standard Leader, Reformer Product, Transformer Product)

Next Leader: Next Leaders are an industry’s golden children because they are able to violate the rule that performance and price move in the same direction. Next Leaders create a value proposition offering higher performance for a notably lower price than the industry Standard Leaders. Next Leaders offer this attractive value combination to a niche segment of customers in the industry. The better-than-standard performance of a Next Leader product results either from an application of new technology or from a unique approach to benefit bundling in their products. The new technology or benefit bundling not only improves performance but also reduces the cost-to-serve for a segment of customers. This low cost structure allows Next Leaders to offer pricing in the range of 20-50% below the prices on Standard Leader products.

Next Leaders do not appear in many industries. When they do appear they can transform an industry, whether the industry is in manufacturing, retail or service. Toys R Us invented the toy retailing category killer, much as Home Depot has done in hardware retailing. These companies offer great depth and breadth of products, in massive stores, with limited personal assistance and low prices. Other Next Leader examples include the early Apple in the personal computer industry and Intuit in personal financial management software. Both of these firms exploited a new technology to become Next Leaders. Jiffy Lube, in auto services, used a new approach to benefit bundling, where the company eliminated the expense of mechanics and built outlets equipped solely for oil and fluid changes. Jiffy Lube’s conveniently located stores promised a twenty-minute while-you-wait oil change and prices below those charged at local gasoline stations. Domino’s Pizza offered the original, mass marketed, delivered-to-your-home pizza, also at low prices, by eliminating most of the costs of the restaurant.

The eventual market share of these companies is difficult to forecast. Next Leaders tend to create new industries of their own. Next Leaders usually become Standard Leaders in their new industries. On occasion, as in the case of Apple, they become Performance Leaders.

« Back to Glossary Index