The Future of Your Company Depends On It
Al Ries, a well known marketing strategist, who has written several successful books with his former partner Jack Trout, now turns his attention to business management.
The Drive to ExpandClassic business wisdom would tell you that the way to achieve success is through growth. Logic would tell you that in order to grow, you need to expand: through product, line extension, diversification, distribution types and outlets, mergers and acquisitions. Corporate demands are for substantial annual increases in sales and profits, even in flat markets.
Ries claims that this pursuit of growth causes companies to become unfocused, and ultimately unprofitable.
What Happens When You Take Your Eye Off the BallA successful company starts out highly focused on an individual product, service, or market. Over time, the company becomes unfocused. It offers too many products and services for too many markets, at too many price levels. It loses its sense of direction. It doesn’t know where it is going, or why.
The urge to expand takes your eye off the core business, which eventually will suffer from the lack of attention.
Narrow the Focus: Get Back To BasicsRies puts forth the argument that, in fact, for the long term sustained growth, less is more. In order to grow, you must actually narrow the range of products or services that you offer.
He says it makes more sense to stay focused on the core business in the first place, so that it doesn’t need fixing in the second place. The minute the company starts chasing synergies and secondary opportunities the company starts to go downhill.
To support this position, Ries offers many examples, from a broad range of enterprises, showing the effects on market share, sales volume, and profit figures.
Find Your WordA focus needs to be simple and memorable. Ideally it can be stated in a word. If you can own a word in the mind of the customer, you will be the market leader.
Examples of this which Ries uses are:
· when you think of film, you think Kodak
The focus need not be a product. It can also be a service or an idea:
· the focus of Fedex is “overnight”
The entire company should be focused on this word. Ries notes that the companies who have established their word or name, in the minds of the customer are companies whose focus is on that word, not companies for which it is a subsidiary, or one of many brands.
A Focus is Not Instantly SuccessfulRies provides evidence that when you narrow your focus, sales decrease in the short term, and increase in the long term. When you broaden your focus, sales increase in the short term, but decrease in the long term. Because the results are not instantaneous, it is difficult for most people to link the cause and effect. (e.g. a sales or market share decline today is not easily recognized as the result of an expansion undertaken 2 years ago). Ries shows us this relationship by looking at the long term results of several companies.
In the short term, narrowing the focus will cost you business. Fewer people will want to buy your product or service, or you might lose sales by dropping products or services. A powerful focus is almost never effective in the short term.
It is only by sticking with it over the long term, that you will dominate the market in your category.
What works in the short term almost never works in the long term. A company run by chasing success is a company ultimately headed for failure.
A Focus Takes CourageIf you’re thinking of developing a focus for your company, keep in mind that you are going to meet with tremendous resistance. A focus is a simple, easy to understand concept that is going to be difficult to sell to your associates. A focus goes against the grain of conventional thinking, which is totally oriented toward growth.
You have to have the courage to make a focusing decision, and then wait for the market to react to your move. It won’t happen overnight.
Once you have made the decision to focus, it takes iron fisted control from the top, without which the company will soon lose its focus, and again begin to spread out and diversify.
Ries presents a well researched and compelling point of view. Anyone involved with establishing company direction would do well to read and consider this book. (J. D.)
Focus: The Future of Your Company Depends On It, by Al Ries, published by HarperBusiness, 1996.