Despite the evidence that businesses with a focused offer outperform more diverse businesses, many companies find it difficult to create a simple, focused model for success.
The truth is that creating the simplicity required is difficult. There are three core reasons for this:
- It forces choice. Keeping things simple requires constant pruning of the business, its offer and its operations. This, in turn, demands that choices are made, certain projects are killed and that some activities are eliminated. Many managers find this difficult, but it is necessary. It is little surprise that when Sir Stuart Rose first took over at M&S, the capacity and the capability of the organisation to drive growth was aided by a reduction in “strategic” projects from 30 to 10.
- It may lead to some lost sales and profit in the short term. Many companies drive growth by adding one or two more sub-categories to their existing offer, but, over time, this stifles the energy of the organisation to deliver its core business effectively. Unilever, on the other hand, has delivered recent growth on the back of focusing on fewer categories where the company has real competitive advantages. Despite losing sales in some less attractive businesses, the company has more than made up for this by focusing its resources where it can achieve better returns.
- A fear that it reduces options for future growth. The economic downturn and related uncertainty has encouraged managers to hedge their growth. It is true that the recession will create different market opportunities, but history- see here and here – tells us that it is those companies that focus on investing where they are advantaged that perform best in the subsequent recovery.
The purpose of this blog is to give executives more confidence to create focus and simplicity in their organisations, and tohelp them eschew the temptation for the small, incremental gains that add unnecessary complexity.
I welcome your ideas, comments and challenges and hope that you’ll join in me in this journey.
Very best, Stuart.
© Stuart Cross 2009. All rights reserved.