Forget conventional wisdom. In Focus: The Future of Your Company Depends on It (HarperBusiness, $25 cloth), author Al Ries argues against growing your company through rampant diversification. To the contrary, he atBODYs, the company that tries to be all things to all people ends up being--you guessed it--nothing to no one.
"It should [be] obvious that a company cannot keep expanding its product line forever," Ries explains. "You reach a point of diminishing returns. You lose your efficiency, your competitiveness, and most ominous of all, your ability to manage a diverse collection of unrelated products and services."
As examples of what not to do, Ries points to failed attempts by companies such as Gerber, Chrysler and Liz Claiborne to expand beyond their core merchandise. "One day a company is tightly focused on a single, highly profitable product," Ries writes. "The next day the company is spread thin over many products and is breaking even or actually losing money. Brand inflation strikes again."
Interestingly, Ries maintains that the global economy makes it all the more essential for companies to set their sights on smaller targets. "The larger the market, the more specialized a company must become if it is going to prosper," he opines. "When we have truly free trade on a worldwide basis, every company in the world will have to specialize in order to survive."
Without question, Ries' perspective is one worth focusing on.