Key Messages
How Keeping Focus Can Increase A Company’s Odds Of Succeeding In The Marketplace
In Focus, Al Ries reveals why the strongest asset of a company is not growth, but focus.
He dives into the consequences of aiming for an ever-growing company versus keeping focused on specific goals and objectives.
He also explains why it can be much more beneficial to specialize in certain areas rather than trying to do too much, and how this specialization can increase the chances of success in a competitive market.
Ries draws from a range of examples to showcase the importance of focusing in order to remain competitive and relevant.
He emphasizes that understanding technological changes is essential for companies’ survival and that “going global” with your company may ultimately lead to its demise.
Overall, Focus is an excellent book that demonstrates how a strong focus on specific areas can be key for any business’s long-term success.
Companies Aim For Growth Because Of Cost Advantages And Managerial Ambitions
It’s easy to understand why businesses are often so focused on growth; there are numerous benefits that come with increased size and market share.
One of the top reasons for companies desiring growth is the cost advantages that come along with it.
Certain costs like machinery or building expenses remain the same even when production increases, while other costs, such as ingredients, vary according to the amount of goods produced.
For example, if a bakery spends $500 on an oven and $1 on ingredients for each loaf of bread they create, making 100 loaves would have a fixed cost per loaf of $5 ($500/100) plus $1 in variable costs.
This makes one loaf cost $6.
However, if they were increasing production circumstances and making 500 loaves instead of 100 their fixed costs per loaf would still be $5 but their variable cost for a single loaf would be only $1, reducing its total cost to just $2 per loaf.
These types of savings offer businesses a competitive edge in the market due how cheaper prices entice customers since it’s always desirable to get more for less money.
Aside from this reason, another motivation behind companies trying to grow is because managers wish to exploit what comes with size (e.g., greater profits).
If management wants large funds for themselves and their company then aiming for higher amounts of revenue and lower costs is certainly logical and reasonable..
Wayne Calloway’s time spent as PepsiCo CEO proves this; he set out attain a 15 percent long-term growth pace due to seeing it as something beneficial towards achieving maximum profits within reachable goals.
As such, it’s clearly evident why businesses usually have growth as their primary objective.
The Value In Focus: How Concentrating On One Task Can Help Companies Achieve Greater Success
Being a large, ever-growing company doesn’t guarantee success – as evidenced by the comparative values of PepsiCo and Coca-Cola’s stocks.
Despite being larger in size, PepsiCo had a stock value that was only half of Coca-Cola’s.
So why is it that despite having more resources, more employees, and more revenue compared to Coca-Cola, PepsiCo lacks in value? The answer lies in focus.
While Coca-Cola operates solely within the beverage industry, PepsiCo has its hands in many different fields including snacks and fast-food restaurants – making their management structure too complex and unfocused to bring real success.
The problem arises from the fact that management of a company requires not only people skills but also deep knowledge and experience in the specific field it operates within.
Trying to move promising managers through all divisions won’t provide this level of expertise needed for maximum performance; it will only give them ‘well rounded’ experience in every department – far less than the one who focuses exclusively on beverages at Coca-Cola.
Therefore, big companies should not think bigger is necessarily better or successful when it comes to investments or long term profitability – having an excessive broad range approach can sometimes mean that crucial skills needed for success aren’t properly developed.
Focus is key!
The Benefits Of Scale Vs. The Risks Of Losing Focus: A Tale Of Two Growth Strategies
Many companies focus on being successful and often employ management strategies such as line extension and diversification to achieve rapid growth.
The idea is that these practices will help them reach goals faster, but they come with a downside: they can lead to the company becoming unfocused and this lack of focus can significantly impair its performance.
For instance, when a company opts for line extension, their brand is attached to various different products which requires them to manage a diverse array of products.
Similarly, when it comes to diversification, a company needs to become aware of new markets or products that are unrelated to their current ones, increasing the number of competitors they have.
Take Virgin Atlantic as an example: while they mainly provide airline services, the Virgin Group has put their name on multiple other products such as cola drinks and financial services.
This means not only do they have British Airways, American Airlines etc.
as competition in the airline business but also Coca-Cola and Smirnoff in other markets.
This shows how efforts for expansion can lead companies astray, causing them to lose focus and thereby diminish their success.
The Threat Of Unfocusing: How Global Trade Can Sink Companies That Lose Focus
In the age of globalization, companies have never been more able to expand their business on a global scale.
Thanks to treaties like GATT, NAFTA, and APEC being put in place, high tariffs and other trade barriers that may be cost prohibitive are now non-existent.
But while this means businesses can now expand to a larger market and bring in greater profits, it also comes with its own set of pitfalls – namely, companies risk losing focus as they do so.
This is because when trading globally, companies get overwhelmed by the possibilities that exist in various markets they are not familiar with, leading them to diversify too much too quickly without fully considering their competition.
For example, Olivetti used to be focused on typewriters and mainframes but decided to tap into the personal computer field when entering the global market.
What happened? The company has not had a profitable year since 1990!
This goes to show that being successful in one’s home market does not translate into success in a global one.
In other words: globalization helps companies greatly expand their networks with relatively little effort – but it can also lead them astray if caution is not taken.
A Clear Solution To Refocus A Company: Specialization In A Narrow Product Field
By now it’s become clear that diversification and line extension can be bad for a company’s performance.
But the good news is that there is a remedy: specialization.
Specializing in product fields narrows and refocuses a company, improving their success far more than if they had multiple product fields.
This has been evidenced by the trend of department stores like Bloomingdale’s and Macy’s failing while speciality stores like Toys”R”Us are flourishing.
It is clear that specializing in one field attracts more customers than having a variety of goods available, as seen with Charles Lazarus who transformed Children’s Supermart from a furniture store to exclusively selling discount toys.
Ultimately, this strategy proves to be an effective way to focus your company and improve its performance by honing in on one quality product line or field.
The Power Of Specialization In Business: How Expertise Gives Companies An Edge
It is evident that specialized companies perform better than unspecialized ones, largely because customers view them as providing higher quality products and services.
Just like when choosing a cardiologist for medical needs over a general practitioner, customers often rely on the recommendation of experts when making buying decisions.
When looking for something like a computer mainframe in the 1970s, customers sought out IBM because their products were regarded as being of the highest quality.
Of course, if you have high-quality products from an technological standpoint it will be easier to achieve success in sales, but it’s important to remember that perceived quality is just as important to customers.
This is evidenced by Coca-Cola’s widespread success – most people agree it tastes better than Pepsi and other soft drinks.
All in all, by specializing and achieving a reputation for delivering high-quality products and services, companies can lead to better performance overall and more satisfied customers.
The Importance Of Adapting Companies To Changes In The Economy
Technological advances bring about changes in the economy that can mean make-or-break success or failure for companies.
Take Kodak as an example.
In 1992, they were at the top of the market with a $20 billion company that was particularly invested in analog photography.
By 1995, however, sales had dropped due to digital photography being introduced on the scene and Kodak had gone down to a $13 billion corporation.
The reason? They failed to embrace digital technologies in time which allowed other companies to become the leaders in digital photography.
What can we learn from this story? New technologies change the market, so you should be prepared to adapt your company’s focus accordingly in order to remain successful.
Companies must stay up-to-date with technological developments to ensure that their products stay relevant and competitive on a changing market.
If you don’t keep up with new trends and changes, your company won’t last long.
The Secret To Successful Conglomerates: A Multi-Step Focus
A single company needs a single focus, while a conglomerate needs a multi-step focus.
This was made clear by companies like General Electric and Dover Corp., both of which are successful conglomerates despite having several different brands.
To make this work, the key is to separate out their many different markets into smaller segments.
By identifying each brand’s specific price range and customer segment to appeal to, the conglomerate can avoid any internal competition between its brands that could result in a decrease of profits.
This strategy was particularly evident when Alfred Sloan took over General Motors in 1921.
He identified five automotive brands – Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac – and distinguished them from each other clearly with their own specific price ranges so that they wouldn’t compete against each other – resulting in the conglomerate’s profits remaining intact.
Wrap Up
At the end of Focus, author Tanya Zack reveals her key message: that while growth is often a priority for companies, they don’t want to sacrifice their focus in the process.
She emphasizes that globalization can weaken a company’s focus and that specializing is often what will save them.
Specializing is also beneficial for success as consumers perceive products of higher quality when there is specialization.
Overall, Zack’s key takeaway from this book is that companies need to prioritize maintaining focus even if it means sacrificing potential opportunities for rapid growth.
Companies should consider specializing in order to remain competitive and create high-quality products that consumers trust and rely on.
