Here's how you can take advantage of the strength that all small businesses share--their smallness.
It pays to narrow your company's niche -- but it's never easy
Quick quiz: who sells sunglasses? Not that long ago, the answer was drugstores, department stores, and jewelry stores. So what did Sunglass Hut do? Focused on sunglasses only. The company has grown from one kiosk in a mall in 1971 to more than 1,800 stores today.
You don't have to be a genius to succeed in business today. You just need a narrow focus.
Consider that once upon a time, every town in America had a coffee shop or diner that sold a wide variety of inexpensive foods. Now, many of those coffee shops are gone--replaced in part by the more specialized McDonald's and Burger King. Coffee shops also sold a lot of coffee and pie. Howard Schultz eyed that market and focused on the coffee. Today Starbucks is worth at least $2 billion, and Schultz's shares, about $68 million.
There's enormous power in being a specialist. Is Starbucks's coffee better than the coffee shops'? What matters is that people think it is. If you're a specialist, people assume your product or service is superior. If you aren't, they question your expertise.
When it comes to focus, small companies like yours and mine have a natural advantage. Limited resources force most start-ups to begin with a narrow niche. But the importance of specializing is a lesson companies must learn over and over again as they mature. When a small company becomes successful, it says, "I want to be like a large company." And it does what a large company does: jumps into everything. That's what I'm trying to stop.
In my experience, nobody wants to focus unless forced to do so. I've worked on many different problems over the years at companies large and small, and I find one consistent theme: every company tends to go from order to disorder. Many executives still believe that they should extend "the brand" in any way possible. Those people make a conscious effort to unfocus the corporation. They want to put their company's name on everything.
Don't get me wrong: focus doesn't mean you can't try new directions. In fact, one way to find a strategic focus is to try out a lot of different things--with one important caveat. Once you find a focus that works, you must have the discipline to concentrate on it--and give up what doesn't fit.
That's not easy, I know. As a business owner, it took me 15 years to find my true focus. My former partner, Jack Trout, and I ran an advertising agency from 1963 to 1989. What was later to become our book Positioning came out as an article in Advertising Age in 1972. Because of the success of Positioning, by 1980 we had become not just an advertising agency but also a marketing-strategy firm. We made the decision to focus on marketing strategy in 1987 and shut down the advertising business within two years. In retrospect, we should have made that decision in 1972.
What took us so long? We thought we were an advertising agency. But after we wrote Positioning, we got more and more calls from people saying, "I don't want your advertising agency; I just want you to tell us what our positioning strategy should be." That represented an enormous opportunity for us--one it took us 15 years to take advantage of. That's because changing your corporate identity is wrenching. You might have to let loyal employees go, as we did.
When we finally became marketing strategists, it made all the difference in the world. Our company became much smaller in size, but within the first year, my partner and I had quadrupled our income. When we were an advertising agency, we'd get 20% of the marketing-strategy work we bid on. When we became marketing strategists, we got 80%. Clients were predisposed to hire us because we were the experts. That's the beauty of finding your focus.
Al Ries's most recent book is Focus: The Future of Your Company Depends on It (Harper Collins, 1996).