By Wally Bock and Thomas Hall
Today’s entrepreneurs and business leaders must tread a tightrope through a universe of distractions. Information pours into our brains in a relentless, never-ceasing deluge. A rising army of companies across the globe competes for our customers using “new and improved” business models and practices that lead us to second-guess ourselves. Meanwhile, social and economic turbulence threaten to shake apart what we’ve built. In the eye of this hurricane, it’s all too easy to let something very basic yet very crucial slip away: focus.
That’s right. The ability to focus ruthlessly in the midst of chaos is what separates the companies that grow steadily and successfully from the ones that get distracted, trot down the wrong side path and find themselves lost in the forest.
You’ve heard the phrase, Do one thing and do it well.” Well, that’s how companies that succeed long-term do it they concentrate on doing one thing better than anyone else. They block out the external noise and stick to their proverbial knitting until the strategy they’re following just doesn’t work anymore.
Chico’s is the perfect example of what happens when a company focuses ruthlessly and when it loses that focus. The clothing franchise is known for selling stylish but comfortable clothing to women from 35 to 65 in upscale households. Everything it does, from its Passport Club to its unique “0 to 3” sizing system, is meant to make Baby Boomer women feel special.
When Chico’s sticks to that simple formula, it grows and thrives. When it gets sidetracked or seduced by other things marketing to a younger crowd of shoppers, changing its product mix or expanding into other brands, for example it begins to flounder. Its stock prices have risen and fallen, predictably, as it veers away from its core strategy and then returns to it again.
So what is a core strategy, anyway? If you’re thinking it has something to do with complex planning exercises that end in piles of binders, you’re wrong. A good strategy is simple and useful. It boils down to how you answer two questions: 1)How are we going to beat the competition? 2) How are we going to make money?
There are five basic strategies you can use as models for your business.
Implementing an Opportunity Strategy means doing something different from what everyone else in your industry is doing. Think “game-changer” you take bold action that transforms a business or the way a business is run.
To be successful using this strategy, you must have the ability to spot big opportunities, and that ability will probably grow out of your own experience. You’re more likely to either see an opportunity in your own industry or see how you can apply an idea from an industry you’re familiar with to a new industry.
OPPORTUNITY in Action: Staples
In 1985, when interviewing for the CEO position at Makro, a European warehouse-type store, Staples’ founder, Tom Stemberg, visited one of the company’s stores. The store sold all kinds of merchandise including clothing, electronics, food and toys. But what caught Stemberg’s eye was the fact that the store’s office supplies were flying off the shelves.
Thus, the idea for Staples was born. Stemberg and his business partner, Leo Kahn, would create what Stemberg calls the Toys ‘R Us” for office supplies.” But to be successful, Stemberg knew he would have to prove to small business owners that his store could benefit them.
With research he found that small business owners might know that they were overpaying for office supplies, but they were sure it didn’t amount to enough to make that much of a difference to their bottom line. He and Kahn realized if they were going to succeed, they would have to convince small business owners of three things:1)There was a huge difference between what they paid for office supply items and what big businesses paid for them; 2) that difference added up to enough that it was worth paying attention to; and 3)the buying process would have to change if they were going to reap the savings Staples could offer.
Staples began administrative operations in January 1986. The first store opened on May 1 of that same year in Brighton, Mass. Things moved slowly in the beginning, but in May 1989, Staples went public. The offering raised money to finance even more new stores. By 2000, Staples had delivered 12 consecutive years of more than 30 percent growth in sales and earnings.
Companies following the Technology Strategy use technology to transform a market. (This is not to be confused with using technology to magnify the strategy you do follow a practice that applies to almost every company.)
“Very few companies use technology as a core strategy,” says Hall. “Amazon is one of my favorite examples. Most people think of it as a bookseller that happens to sell online. But that’s a misconception. Amazon isn’t a ‘bookseller.’ It isn’t even a retailer. It’s a business that uses different kinds of technology that create a multitude of profit streams.”
TECHNOLOGY in Action: Amazon
In 1994, Amazon founder, Jeff Bezos, read that the Internet was growing at a rate of 2,300 percent per year. Bezos knew there was opportunity in anything growing that fast. So he left the firm he was working for to start his own business. Bezos knew that technology was going to allow millions of people to go online and buy things. But he wasn’t sure what the best online business would be. However, he kept coming back to books.
Amazon opened for business in July 1995. It sold more than $12,000 worth of books the first week. By the end of the first month, Amazon had sold books to people in all 50 states. By the end of 1996, Amazon had revenues of $15.7 million. Amazon went public in May 1997. By the end of the year, share prices had risen more than 200 percent. In 1998, Amazon was still growing, but it was still a books-only and U.S.-only business. By 2000, it was doing business in 20 countries and more than half of the Year 2000 revenues came from products other than books.
Amazon’s ruthless focus on technology has made the company a trailblazer. It developed some of the basic tools of e-commerce. It developed the software that makes recommendations to you when you visit the site. It developed some of the first “Wish Lists” and the first one-click ordering system. Amazon also leverages its electronic capacity allowing businesses and individuals to rent online storage. And most recently, it developed the Kindle e-reader and its digital warehouse of more than 300,000 books in Kindle format.
Amazon uses the tactics that work again and again. And it leverages its technology. As it develops software and expertise, it uses those to start new businesses.
The Implementation Strategy is built on superior execution. Success in this strategy lies in executing the details effectively and efficiently every time. You have to work for continuous improvement in the basics and make sure you do them better than anyone else.
IMPLEMENTATION in Action: Walmart
In 1948, Sam Walton opened Walton’s Five and Dime in Bentonville, Ark. Business was soon thriving and he opened store after store. Before long, he had 16 variety stores scattered across Arkansas, Missouri and Kansas. Walton had a winning formula, offering low prices in clean stores that were open at convenient times. He could make money doing that because he bought in quantity, bargained hard and tried to make everything as efficient as possible.
By the early 1960s, Walton was riding high. He was the largest independent variety store operator in the country. He decided to capitalize on the suburban sprawl that was taking place in the country at that time. Walton had always thought he would do better with bigger stores, so he experimented by opening a 13,000-square-foot store, Walton’s Family Center, in St. Robert, Mo., a town of only 1,500. Even though the town was small, sales were not. The store took off like a rocket.
The next few years would see a number of discounters come and mostly go. In addition to Target, Kmart, Gibson and Walmart, there would be names like Woolco, Ayr-Way, GEM and Fisher’s Big Wheel. Walmart is the one that became the giant. In 1979, Walmart had $1 billion in sales for the year. By 1993, it was doing $1 billion a week. In 2001, Walmart had billion-dollar days. By 2008, with revenues of $405 billion, it was averaging more than a billion dollars a day.
A retailer with a “lowest price” value proposition can make money with a ruthless focus on only two things. You have to pay attention to the business basics. With low margins you’re always running close to the edge. And, you have to maintain a ruthless focus on operations. You have to drive cost out of them. You have to improve them and make them more efficient. That’s what Walmart did.
The Differentiation Strategy defines a niche that companies can exploit and defend. Companies that use it as a core strategy are looking for more than competitive advantage. They’re looking for “sustainable” competitive advantage. They focus ruthlessly on doing the things that help them not only stand out, but stand apart.
In traditional economics, there’s only one way for a company to beat the competition. You must create more value for the customer by giving him or her more for his or her money. Difference is not enough. You have to give the customer what he or she wants. If you don’t accomplish this, it doesn’t matter how different you are.”
DIFFERENTIATION in Action: Publix Supermarkets
Publix is the largest employee-owned company in America, and it’s very successful. The company’s success, however, begins with its founder, George Jenkins.
Jenkins had already owned two successful grocery stores in Winter Haven, Fla., when he opened the state’s first supermarket there in 1940. The store was amazing. Jenkins called it a “food palace,” but he named it Publix Supermarket. After the war, he bought a 19-store chain of supermarkets and refitted all of them to match his food palace.
In 1951, he moved his headquarters to Lakeland, Fla. Expansion and innovation continued. In 1956, Publix achieved $50 million in sales for the first time. In 1959, it became the largest supermarket chain in Florida. In 1970, sales hit $500 million. In 1974, they hit $1 billion. Fast forward 35 years, and in 2009, Publix opened store number 1,000 in St. Augustine, Fla. Today the company operates stores in five Southern states.
Part of what makes Publix a success is a ruthless focus on making the customer experience great. This goes far beyond customer value. It extends to the entire experience of doing business with Publix. It includes parking, store design and the selection and quality of the food. It includes how well the shelves are stocked, the in-store services and the check-out experience.
Outside of every market, you can read the company’s slogan: “Publix, where shopping is a pleasure.” The entire culture at Publixone where people work hard in a supportive, upbeat environmentsupports that slogan. If you boil its secret of success down to its essence, it’s a ruthless focus on people and doing what’s best for them. Some of those people are the people who work at Publix. And some are the people who shop there.
The Acquisition Strategy calls for companies to create growth and development by acquiring other companies. This can be a dangerous strategy, but companies that master the process are among the fastest growing companies in the world.
“The theory behind an acquisition strategy is based on two concepts,” says Hall. “First, the company should be able to spread general administrative costs over several units and consolidate resources in a way that improves profitability. And second, an acquiring company can reduce the risk of doing business in a single market by spreading the risk over several markets or locations. This is a similar argument for diversifying an investment portfolio.”
All successful acquirers have five important factors in common:
1. They have done enough acquisitions to learn what works and what doesn’t for them.
2. They have a clear idea of why they’re acquiring companies beyond a simple goal of growth.
3. They recognize that people and relationships are keys to business success.
4. They understand that the deal isn’t done until integration is complete.
5. They have a standardized, but flexible, process for doing acquisitions.
ACQUISITION in Action: Cisco
Cisco is one of the best-known companies with an acquisition strategy. Since its first acquisition in 1993, a small switch maker named Crescendo Communications, Cisco has gobbled up more than 100 companies.
It’s become Cisco’s core strategy. Where other tech companies may use R & D (Research & Development) to come up with products, you could say that Cisco uses “A & D” (Acquisition & Development).
Cisco has received a lot of good press for its “acquisition playbook,” but it’s doing the same thing that other successful acquirers do. It has learned how to do acquisitions right by doing enough of them to climb the learning curve. Now Cisco has managed to standardize the process so it can repeat success.
From time to time, every company has to step back, take a critical look at itself, and ask, What is it we’re really trying to do here?” says Hall. When you can confidently say, I’m clear on my strategy and now I’m going to eliminate anything that doesn’t fit,” you’ve won half the battle. You might be surprised by how many of your competitors can’t say that.
Ruthlessly focus on a single growth strategy, redesign your organization to support it and relentlessly execute, execute, execute.
Wally Bock and Thomas Hall are co-authors of “Ruthless Focus: How to Use Key Core Strategies to Grow Your Business.” Bock is a writer, speaker and consultant who specializes in learning and sharing how leadership and strategy combine to create successful companies. He is the author or co-author of several books and writes the award-winning Three Star Leadership Blog. Hall has spent most of his career advising clients on growth as well as growing companies himself. He founded and built the largest advertising education organization in the country and sold it; he built and sold an advertising firm to a national company; he developed a system for public service advertising now used throughout the U.S.; he has built a multi-million dollar property investment firm; and he chairs a Florida-based communications firm.
.@Adtran updated its Mosaic suite this week. dlvr.it/RBMhzs
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