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Management Consultants. A group of senior-level management
consultants, offering strategic planning and marketing services
to a wide range of public and private sector clients.
Focus
The Future of Your Company Depends On It
by Al Ries,
HarperCollins, New York, 1996
Al Ries, the author (with Jack Trout) of such classics as
The 22 Immutable Laws of Marketing and The New Positioning,
argues that one of the big problems with companies today
is a lack of focus upon a core product or service. According
to Ries, many enterprises have got caught in what he calls
the 'line extension' or 'diversification' traps in an effort
to grow their business. These strategies have failed: in
example after example, Ries shows how focused companies
make greater profits and have higher share values than unfocused
companies.
The
line extension trap occurs when a company takes a successful
brand positioning for one product or service and tries to
extend it to other related (or sometimes unrelated) products
or services. The result in this case is confusion in the
mind of the consumer, which can be detrimental to the positioning
of the product or service. And, as Ries has argued in other
books, it is this positioning of the product or service
in the mind of the consumer the brand 'owning a word'
in the mind of the prospect that is critical to success
in market leadership.
"Leaders
own their categories...literally. By that I mean that a
leader owns the word that defines the category in the mind
of the prospect.
Owning
a word in the mind is a leader's fundamental strength, more
valuable than its offices, its factories, its warehouses,
its distribution systems. You can always replace a physical
facility that burns down, but you can't easily replace somebody
else's word in the prospect¹s mind.
If you're
not the leader, you tend to see the problem as trying to
produce a better product than the leader. I¹ve worked
with many number two, three, and four companies and invariable
they see products or services as either better than the
leader's product or service or at least comparable to it,
but at a lower price.
Yet
they seldom make much progress against the leader, and they
rarely, if ever, overtake the leader.
It¹s
not enough to produce a better product or a cheaper one
than the leader offers. It's helpful, but it's not enough.
What you must do is develop a corporate strategy that allows
you to cope with that powerful position in the mind.
That's
what focusing is all about. If someone else "owns the
category" your only viable strategy is to narrow your
own focus and own a piece of the category." (pp. 100,
101)
The
diversification trap occurs when management acquires or
develops other businesses that are related to the core product
or services, in an effort to 'tap synergies' or 'exploit
convergence opportunities'. Here the problem lies in the
management of the company becoming concerned with two or
more essentially separate business operations, rather than
the core business:
"It
always happens. The minute management takes its eyes off
the core business and starts chasing synergies and secondary
opportunities, the company starts to go downhill. It may
not be immediately obvious. Problems usually fester for
some time before they become obvious." (p.179. 180)
It is
possible for companies to develop what Ries calls a 'multistep
focus', offering several different product or services to
the consumer. This is essentially the strategy that was
pursued by Albert Sloan in the early days at GM, or the
approach to the market that is currently being taken by
Darden Restaurants, the IDG publishing company, and many
others. Here the key to success is to establish several
different products, each of which has its own separate brand
identity, and each of which appeals to a different (and
distinct) market segment. Furthermore, each has its own
management structure, which is solely focused on the success
of that particular brand. The brands may be related to each
other in terms of a sales progression in the mind of the
consumer (e.g. a car buyer starting with a Chevrolet, then
moving up to a Pontiac, then a Buick, Oldsmobile and eventually
a Cadillac, as each becomes successively affordable) but
each is perceived to have a distinct identity.
In the
retail sector, focus is clearly the route to success that
has been taken by some of today's retail giants such as
Best Buy, Circuit City, Barnes and Noble, Home Depot, Staples
(Business Depot in Canada) and many others. Ries analyzes
the steps that these operations have taken in becoming retail
'category killers' as follows:
1. narrow the focus
2. stock in depth
3. buy
cheap
4. sell
cheap
5. dominate
the category
Ultimately,
what is important to become dominant in the category of
business that you are in is to develop a perception of quality
in the mind of the consumer. Ries points out that this perception
is quite unrelated to the actual quality of the product
or service. He identifies four ways in which focus can improve
the perception of quality:
1. the
specialist effect by positioning your company as doing
nothing but making a certain product or providing a certain
service, and that all your energies are focused upon doing
that to the best of your company¹s ability
2. the
leadership effect by being the first company to offer
a product or service, or by being the largest company to
offer it, conveys the idea that the company is setting the
standard and therefore must be the leader in product quality
3. the
price effect the highest-priced product in the category
is generally perceived to have the highest quality (think
of Rolls-Royce or Rolex)
4. the
name effect a powerful and evocative name for a product
or service can help develop an image of high quality. "Other
ways to improve the perception of quality is by changing
the "look" of the product, the packaging, and
the name. Perhaps the most important aspect of quality is
the name itself. It's especially important to use a specialist
name rather than a generalist name." "(p.93)
Ries
ends the book by presenting fifteen keys to an effective
focus; tips and pointers on the notion of focus that should
be considered by any company that wants to develop a more
effective focus:
what
a focus is:
1. a
focus is simple
2. a
focus is memorable
3. a
focus is powerful
4. a
focus is revolutionary What Ries has to say here is
quite interesting:
"Managers
have been taught to aim for growth, to expand their product
lines, to get into new areas, to take advantage of synergy.
Conventional thinking is totally oriented toward growth.
Bigger is better. Growth can do no wrong.
The
fact that these expansionist theories don't usually work
has not stopped their adoption. If you believe that something
should work and it doesn't then the fault lies in the execution,
not the theory. It should work, goes the theory, therefore
we have to find a way to make it work.
If you
believe that growth is good, then you will resist any attempt
to focus a corporation. The truth is, focus does restrict
growth outside a selected area, much like pruning a plant
forces it to grow only in a specific direction. If you want
to focus a corporation, you¹re going to have to be
prepared to break a few GAMPs.
A GAMP
is a Generally Accepted Management Practice. At the heart
of GAMP thinking is the demand for growth. Not just growth
in sales, but growth in profits, growth in return on investment.
When viewed from a growth platform, any attempt to focus
a company is considered reactionary. To make an omelette,
you have to break a few eggs. To focus a corporation, you
have to break a few GAMPs." (p. 275)
5. a
focus needs an enemy
6. a
focus is the future
7. a
focus is internal as much as external
8. a
focus is what the country needs - "Countries shouldn't
fight the focusing process. Let competition dictate which
countries make which products and services. Let's all end
trade barriers, which only protect the inefficient producer
and do nothing for the customer and, in the long run, nothing
for the employee either" (p.283)
what
a focus is not:
9. a
focus is not a product
10.
a focus is not an umbrella
11.
a focus does not appeal to everybody
12.
a focus is not hard to find
13.
a focus is not instantly successful
14.
a focus is not a strategy - Ries' complaint here is that
a strategy is in most cases, too broad and growth-oriented,
giving the company, if anything, a motivation to become
unfocused through diversification, acquisition, line extension,
etc.
15.
a focus is not forever: "Sooner or later, even the
most powerful focus becomes obsolete. That's when a company
must refocus itself." (p.289)
This
is another very thought-provoking book from Al Ries, a short
read but a very useful one.
The
above summary has been provided to you compliments of TCI
Management Consultants
