5 Reasons to Focus, 5 common fallacies, 5 criteria to evaluate your focus
The most-frequent “heated” discussions I have with entrepreneurs are on the subject of Focus. Most entrepreneurs will argue, very passionately, how the need for a tighter focus does not apply to them, for reasons I have tried to summarize below. The discussion is so frequent, so passionate, and so tiring, that I decided to write this post and be done with it!
As any successful entrepreneur or investor will tell you, scale requires focus. Creating value requires focus. Building leadership in developed markets requires focus. You are defined by what you will not do, as much as by what you will do.
Interestingly, even students and young, aspiring entrepreneurs usually agree. It seems only experienced professionals (and struggling entrepreneurs) are reluctant to. I hear the same (flawed) logic over and over.
Why Focus? Here are 5 Reasons
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Consistent message to your prospects, especially word-of-mouth and web brand.
Your prospects learn about you from multiple sources (your sales pitch, your employees’ communication, your customers’ word-of-mouth, posts and articles about your offering…). There is a lot of power in a consistent message from all channels. Consistent message from all channels require that you have a simple, focused positioning.
A focused message is like a laser beam. A 40-watt light bulb will give you barely enough light to read by, while a 40-watt laser will cut through metal and concrete. What is the difference? Every photon is a focused laser beam (just as every communication in a focused message) moves in sync, in the same phase, and in the same direction. The result is several-orders-of-magnitude higher impact.
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Positioning as a specialist “expert”
If (God forbid) you need to see a doctor, who would you rather see: a GP or a specialist? Specialists are respected more, paid more, and have less competition. Yet, to achieve this positioning, they had to focus narrow and deep. That is the power of focus.
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Deeper institutional knowledge, fine-tuned tools and processes
By definition, a tighter focus means all your people, systems, and process can be deeper rather than broader. Therefore, you will be more knowledgeable about the customers’ business, offer more customized solutions, and create a higher customer impact – increasing your probability of success.
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Lower cost-of-sales
A tighter market focus means more customer referrals, higher reference-ability, and more targeted marketing, all leading to lower sales cost.
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Higher ROI on investments in R&D, learning and marketing
As a child, did you ever use a lens to focus sunlight and burn a piece of paper or wood? Focus enables you to create fire (or results) using much lower energy (or investments). That is the power of focus.
In summary, if you want to scale and create shareholder wealth, you must focus.
5 Common Concerns (fallacies)
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I can do more (my offering, or capability, is general)!
However, can your organization deliver better, sell better, market better, and do so sustainably? Focus will allow you to succeed without requiring an organization of superhumans.
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A narrow focus is too risky, I want to diversify my bets
Focus does not guarantee success. It only increases the probability of success. Ironically, diversification reduces your probability of success.
Diversification theory actually does not apply to the bets of a company with limited resources. (If interested: The theory of diversification assumes that the original risk of either event does not change as a result of diversification. You benefit to the extent that the original risks are not statistically co-variant. The very act of spreading your resources across multiple segments will increase your individual risk. Diversification will therefore increase the overall risk of your venture!)
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I need variety, focus would be too boring
Have you ever seen fractals? Google it if you have never experienced one. The richness and beauty is independent of breadth – the deeper you look, the more variety becomes apparent. A specialist will see interesting differences in two cases which look very similar to a generalist.
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Successful companies are not focused
Two fallacies here. First, look at what successful companies were doing when they were at your stage, rather than what they are doing now. Second, correct for maturity of the industry. 30 years ago, an MBBS would be considered a pillar of the society. 15 years ago, one would have to be at least an MD to get any respect. Today, a medical practitioner will aspire to super-specialization. As industries mature, professionals and companies must specialize more.
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I do not know enough about any industry vertical to be able to focus
Do you want to bet your career, money and reputation on a venture without adequate depth?
The fallacies emerge from a basic misunderstanding of what focus means. Most entrepreneurs interpret focus to mean “markets I can service” or “where I get my revenue from”; whereas focus is a subset of these – focus is where you make your investments (in marketing, R&D, domain expertise…).
Therefore,
focus = tighter investments
focus = increasing probability of success
focus ≠ giving-up opportunity
How to tell if my focus is right?
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Homogenous customer: a consistent message works
Will one message or positioning work for all my focus customers?
(Remember, you could be selling outside the focus, who might be buying because of the same or other reasons, but your messaging is targeted at your focus segment).
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Connected industry
Do all my focus customers talk to each other (or belong to the same web communities, or read the same magazines…)?
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Can I build a number-one position within the segment?
Assess the competition.
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Subset of core competence
Do the requirements of the segment align well with my strengths?
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Large enough opportunity to create a Rs. 100-crore business
Is the focus segment large enough to create a sizeable business (a Rs.100-crore revenue potential is a good benchmark).
If the answer to these 5 questions is yes, you have a winner!
