Expand By Narrowing Your Focus
LinkedIn Article by Tim Williams
December 17, 2015
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What’s the logical way to grow your business this coming year? Expand, right? Add more lines, serve more markets? Seems like common sense. But for the most part, business strategy is not common sense.
For example, logic would suggest that you’d grow faster by targeting the “general market.” But the most successful brands don’t try to sell to everyone; they are squarely focused on a particular segment of the market. They know that depth is a much more profitable strategy than breadth.
Imagine a sculptor not willing to risk chipping away enough of the marble to reveal the fine detail of what makes a beautiful human form. This is similar to the behavior of companies not willing to risk a clearly defined strategy. They’re afraid to keep chipping away at the generalities of their business strategy until they get to something concrete and specific. This is because they perceive “general” to be less risky than “specific.”
The fact is, defining your company’s positioning strategy is usually very counterintuitive. It requires a new mental map of what truly succeeds as a business strategy. The “more is better” model that most of us carry around in our heads is the wrong mental construct. What works is narrow, not broad.
VERTICAL SUCCESS VS. HORIZONTAL SUCCESS
Most companies have the unrealistic aspiration to compete across all segments of the market. But success doesn’t require you to serve all segments. It just requires that you serve one well. This is the difference between horizontal success and vertical success. Very few companies are able to achieve real horizontal success, although many attempt it because it has the illusion of being the richest strategy. And even those horizontal players struggle mightily to earn a profit. Take General Motors—a horizontal player if there ever was one—versus Porsche, a car company that focuses on one vertical segment of the market. For most of the past few decades, GM has been one of the least profitable car companies in the world. Guess who has been the most profitable?
Consider the massive energy and resources required to maintain a horizontal positioning strategy, even in a relatively small industry. It only stands to reason that a vertical positioning strategy allows you to make a better product, offer better service, and usually charge a higher price. This is why the premium brands in categories from golf clubs to outdoor furniture are niche players, not conglomerates. The very definition of excellence is to be good at something in particular. It’s not only impractical for a company to be excellent at everything, it’s quite impossible.
NARROW IS NOT THE SAME AS SMALL
Most business professionals equate “narrow” with “small,” but in reality these are two completely different concepts. To have a narrow business strategy doesn’t mean you’ll have a small business. Quite the opposite. Starbucks is narrow – coffee – but has a global footprint few companies can match. Do you think they would have achieved this kind of market penetration as a “full service restaurant?” Not very likely.
In the world of advertising, the largest agency brands (not to mention the fastest growing and most profitable) are not the generalist agencies, but rather those who are specialized in database marketing. Year after year, the “full service” firms earn lower rankings in the list of top 100 agencies, displaced by firms focused in areas like CRM, digital, and reputation management (public relations and social media). The same dynamics are at play in law and accounting.
Beyond size and profitability, the most focused companies are also the most valuable. Apple is the most valuable company in the world, yet carries one of the narrowest product lines of any company in the Fortune 500.
A business that knows what it stands for will always have happier employees, happier customers, and happier owners. Because it's a lot more rewarding to be good at something rather than trying to be good at everything.