How was Dell Computer able to charge out of nowhere and outmaneuver Compaq and other lead-ers of the personal computer industry? Why are Home Depot's competitors losing market share to this fast-growing retailer of do-it-yourself supplies when they are all selling similar goods? How did Nike, a start-up company with no reputation be-hind it, manage to run past Adidas, a longtime solid performer in the sport-shoe market? All three questions have the same three answers. First, Dell Computer, Home Depot, and Nike rede-fined value for customers in their respective mar-kets. Second, they built powerful, cohesive busi-ness systems that could deliver more of that value than competitors. Third, by doing so they raised customers' expectations beyond the competition's reach. Put another way, these industry leaders changed what customers valued and how it was de-livered, then boosted the level of value that cus-tomers expected. The idea that companies succeed by selling value is not new. What is new is how customers define value in many markets. In the past, customers judged the value of a product or service on the basis of some combination of quality and price. Today's customers, by contrast, have an expanded concept of value that includes convenience of purchase, after-sale service, dependability, and so on. One might assume, then, that to compete today, compa-nies would have to meet all these different cus-tomer expectations. This, however, is not the case. Companies that have taken leadership positions in their industries in the last decade typically have done so by narrowing their business focus, not broadening it. They have focused on delivering su-perior customer value in line with one of three val-ue disciplines – operational excellence, customer intimacy, or product leadership. They have become champions in one of these disciplines while meet-ing industry standards in the other two. (For a dis-cussion of companies that excel at more than one discipline, see the insert "Masters of Two.") By operational excellence, we mean providing customers with reliable products or services at competitive prices and delivered with minimal dif-ficulty or inconvenience. Dell, for instance, is a master of operational excellence. Customer inti-macy, the second value discipline, means segment-ing and targeting markets precisely and then tailor-ing offerings to match exactly the demands of those niches. Companies that excel in customer intimacy combine detailed customer knowledge with opera-tional flexibility so they can respond quickly to al-most any need, from customizing a product to ful-filling special requests. As a consequence, these Three paths to market leadership.