“That’s been one of my mantras—focus and simplicity. Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.”
― Steve Jobs
10x Results "Million $ Idea"
If you try to be great in too many areas (product lines, customer segments, distribution channels, etc.), you will, at best, become average in most of them. You will become indistinguishable from the competition: Average product, average customer service, average marketing.
You need an exceptional product with exceptional marketing with exceptional people who provide exceptional customer service to win big in any market.
The way to become exceptional is to focus all your efforts, talents, resources, and money on the products, customer segments, and distribution channels where you can become truly exceptional.
Apple is probably one of the best case studies on the focus principle. In the late ’80s and early ‘90s when Apple was continually increasing its product lines, it became more and more indistinguishable from the competition. It took the return of Steve Jobs and the radical reduction of Apple’s product portfolio to return the company to profitable growth.
In the checklist below, we have listed a few questions that you may ask yourself to get started on your “focus journey.”
Checklist: Where to focus
Make our buy: Apple focuses mainly on product design and marketing, but has other companies do the manufacturing. Ask yourself, which elements of the value chain help you truly differentiate yourself from the competition? In which areas can you become world class? And in which areas can other companies do an equally good (or often better) job? Look at outsourcing those activities. Don’t keep doing things where you are average or even sub-par.
Product/service lines: What market shares do each of your key product lines have in their respective markets? Are you the market leader (or at least among the top three)? Can you get there over the next three to five years? If not, try focusing on profitable sub-segments of the market or divesting the product/service line altogether. The market leader (Mercedes, Google, Amazon) reaps the big benefits. The followers (and especially distant followers) hardly break even.
Customer segments: Do you cater to retail customers? Or business customers? Or large corporations? Or all of them? The skills that it takes to win in each of these segments, and even sub-segments within them, are very different. That starts with different pricing and service strategies and ends with sales approach plus marketing message. If you can pull all of this off, then good for you. But most companies can’t. Most companies would benefit hugely from focusing on a few, well-picked customer segments. Look at companies like BMW, Nordstrom, or Schlumberger.
There is one important caveat to add. As you start investigating whether to move out of particular customer segments or product lines, you also need to look at the degree of cost sharing or customer sharing between your product lines. Otherwise, it could happen that as you move away from that particular product line, you are still stuck with certain fixed costs (e.g., production line), but on a much-reduced revenue base. This will negatively impact your profitability. The same will happen when customers who used to buy product bundles from you switch to the competition after you have removed an essential product from that bundle. These adverse effects can be offset by careful transitioning over time or sourcing the missing product from a third party to still sell the bundle.
10x Results "Million $ Idea"
If a laser is not focused, it is weak; if the laser light is focused, it can do incredible things.
In your next management meeting, have a discussion with your team on the areas where you are (or can become) truly world class. And even more important, have an honest debate on what this means for the other areas of the company. Kimberly-Clark became a great company a few decades back when they had a frank discussion on how to proceed with the paper manufacturing business.
One of the most critical roles of leaders in any organization is to help their team focus on the few key things/priorities that really move the needle. In your company, what are the “three must-win battles?” Which one or two strategic initiatives do you need to set in motion to win these “three must-win battles”? Overcommunicate these initiatives; have the organization live and breathe them. This creates a laser focus on the initiatives, and this is what leads to extraordinary results.
Moving to Action: Questions to Ask Yourself
What are the areas in your business where you are world class (or can become world class)? How can you leverage these areas to position your overall products and services as truly world class? How can you use these areas to charge premium prices?
What are the areas in your business where you are average or even sub-par? What is your strategy here? Can you turn these areas around? Or source them from a supplier who is world class?
This insight is a chapter from the book "10x Results: 240+ proven ideas to boost revenues, profits, customer loyalty, and employee engagement". The book is available on Amazon.