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 Editor's Note
 Thanks for the feedback on the inaugural issue of "Winning Moves". I hope you'll continue to let me know what you think of this newsletter, and what you'd like to hear about.
I'm a fan of Warren Buffett, as you may have guessed from my mention of him last month. His recent donation of millions to the Bill and Melinda Gates Foundation has been discussed in many ways, and I have one more to share.
I'm also a big fan of my late grandfather. He was very human, a great man. After his death, my father reprinted a list of ten things that my grandfather carried around with him. Number 8 was, "When things break around the house, call a handyman. No intelligent man is capable of fixing anything unless he has made home repair his business."
I think of Number 8 often, but Warren Buffett's latest public move has brought it forward. It seems that Warren Buffett and my grandfather both could admit when they were not an expert, and let someone else do it for them. They don't try to be all things to all people.
As a result, they focus on other things that they do quite well. Warren Buffett's financial success is internationally legendary and my grandfather's successes were celebrated on a different scale.
Unfortunately, not all businesses understand the link between focus and success, much to their detriment.
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Molly Hughes Wilmer
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Feature
The Power of Focus
I've worked with $3 million companies, $30 million companies, and $300 million dollar companies who all had the same problem: they were doing too many things for too many people. And they all knew it! But they didn't know how to stop, or how much it was costing them not to stop.
At the very least, a lack of focus can retard growth. At the worst, it can actually send a company backwards. Either way, trying to be all things to all people will hit your bottom line negatively.
How can focus help growth? Jim Collins, in his book "Good to Great", looks at companies he studied that went from good to great. One of the things they had in common is described by Collins as the "Hedgehog Concept". These companies all shared a core understanding of three facets of the "Hedgehog Concept":
- What you are deeply passionate about.
- What you can be the best in the world at.
- What drives your economic engine.
Truly understanding these three areas drives companies into a simple, "crystalline" focus. According to Collins, the good-to-great companies doggedly pursued one big thing, and stuck to it, rather than attempting to be a "jack of all trades" or all things to all people.
When you think of any strong brand, you can see that they really nailed their core offering before, if ever, they branched out. Starbucks, the king of coffee experience, focused on great beans, then on diverse coffee offerings, and now even sells music. But they are selling the music that reinforces their experience, music that they play in their stores, and they are selling it to their existing target market. Home Depot keeps "trucking along" selling their core offering at great prices. They've started offering truck or van rentals at some stores, but again, that's reinforcing their core offering, and helping customers purchase more than they could fit into their own cars.
The definition of what is too much is different for each company, and what could send one company into the debt column could be a growth tool for another. For a company that focuses on customizations, offering a standardized, "out-of-the-box", "plug-and-play" product or service could undermine the perceived value of their custom work, despite getting to market more profitably. Conversely, a company that has streamlined a standard offering and decides to offer "one-offs" or customizations may take a plunge in profitability by needing to retool how they deliver the product or service.
Focused companies are able to concentrate on improving the quality of their product or service, optimizing the efficiency of their operations, and leveraging their customer relations for cross-sell, repeat, and referral. Focused companies are able to optimize many aspects of their business: cross-selling, domain expertise, efficient sourcing, pricing models, brand awareness, sales channels, etc. Focused companies will grow faster. Here are some examples:
- A food product company that subcontracts their bottle manufacturing can focus on new recipes, improving texture or taste, or more cost-efficient ingredient sourcing, rather than manufacturing equipment or processes for clear glass bottles.
- A software company that focuses on one market rather than five can more quickly establish domain expertise, brand recognition within the market, and improve their product to best meet the market's needs.
Whether you want to go from "good to great" or simply stop the bleeding, a little focus helps a lot!
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 What Can You Do?
How focused is your company? One way to look at your "concentration" is to develop an offering matrix, with your products or services on one axis, and your customer markets on another. The more densely populated the grid is, the more focused you are, and the more you are able to take optimizations in one market or product/service area to another. If you are thinly spread, think about dropping a product/service area or customer market that doesn't show much integration with other sectors. Or think about rearranging your matrix around the most profitable intersections.
Download Our Product Client Matrix
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Ask the Expert
Question
But what about diversification for risk protection?
Answer
You're right. We all know about diversification in our investment portfolios, and I've been quite happy to see the results of diversification in that arena. Focused companies can still be diverse. A software company providing fund-raising software for non-profits can target cultural museums, higher education and K-12, and hospitals and research institutes. It's unlikely that the education, medicine, and the arts sub-markets will all take a hit at the same time.
But, on the other hand, if focus is bringing up risk protection, what is it about your core business that's making you nervous? Maybe you should look for a stronger core business.
Submit your questions to the editor: molly@visionsmc.com
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