Focus

“This book helps you focus on the secret of success” is a quote from the cover of Focus by Al Ries.  We’ll explore this book together and see if that is true.

What I find interesting about this book is its emphasis on marketing.  After World War I the corporation focused on manufacturing (remember reading about the time-and-motion studies of Frederick Taylor?).   During that time, he who produced products the fastest and cheapest won.  After World War II, the emphasis shifted to finance.  This is when the “portfolio” concept became popular.  Businesses were then measured on how well they bought and sold companies in order to develop a high-performing portfolio.

Today, the emphasis is on marketing.  In fact, the book suggests that a good management person is really a marketing person who can read a balance sheet and a profit-and-loss statement.

The authors explain that organizations tend to lose focus as they reach “forks in the road” and decide to take both forks.  This all-forks strategy has been the demise of the airline industry which decided to carry passengers and cargo, to fly to both business and vacation destinations, to fly domestic and international, and to provide first class, business class and coach service.  The problem is that taking both forks may only lead to a short-term increase in revenues and profits.  In the long run, in particular when faced with narrowly-focused competition, the all-forks strategy fails.  And the airline industry is not the only one with this “all-forks” mentality.

In contrast, Southwest has (up to this point) pursued more of a one-fork strategy.  Their narrow focus (even using only one type of aircraft, the Boeing 737) has enhanced their operations and kept them flying profitably. 

The authors of Focus contend that when a company becomes unfocused, it loses power.  (Remember how you used to focus the sun’s energy with a magnifying glass?)  You can actually develop your company’s power by narrowing your focus. 

So what causes most companies to become unfocused?  The answer is “growth” and, in particular, the pursuit of growth for its own sake.  In fact, “unfocusing” is the natural tendency for organizations over time unless the company maintains a conscious effort to remain focused.  Only by focusing “scarce resources on the greatest opportunities” will an organization overcome the natural tendency to “unfocus.”

Now the above “unfocus” malady does not just afflict the giant corporations.  It raises its ugly head in small companies as well.  If fact, the authors state that a small company usually falls prey to “unfocusing” when annual sales reach about $10 million a year.  How does it usually come about?  By line extension or extending the equity of the brand.  This process seems to occur naturally in companies as they seek to flow into new directions. 

The road to Unfocus can take many paths.  One day a company is concentrating on a single, highly profitable product.  The next day the company is spread thin over many products and may be actually losing money.  The question is, “Should you be doing many things subpar, or doing one thing exceptionally well?”

Conclusion: When companies become incredibly successful, they invariably sow the seeds for their future problems. 

Line Extensions

Most new products are line extensions.  Most new products fail.  Keep these facts in mind.

It seems strange, but the authors of Focus tell us that you’ll find more line extensions in categories that are declining in sales than in categories that are increasing in sales.   

Technology change is enhancing the role of the specialist.  Power lies with the specialist, not the generalist.  For example, if there were nothing but general surgeons and you were the only brain surgeon, think of the incredible business you’d have.  And as an incredibly successful brain surgeon, would you think to branch out into the heart, liver, and limb business?  No, you wouldn’t.   

Globalization

The larger the market, the more specialization that takes place (think of the retail options you have in a small town in Montana versus New York City).  Thus, as the world moves to a global economy, companies need to become more specialized.   Yet many companies see the rise of the global economy as a reason to broaden their lines, not narrow them.  Bad choice.   

We’ll close with a quote from Andrew Grove, former CEO of $30 billion dollar Intel, regarding specialization:

“I’d rather have all my eggs in one basket and spend my time worrying about whether that’s the right basket, than try to put one egg in every basket.” 

How many baskets are you watching over? 

Keith

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