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Out of Control

You may think you're on the right track, striving for excellence in all areas. But are you heading for disaster?
September 1, 2001
URL: http://www.entrepreneur.com/article/43336

Bobby Friedman understands that art collectors looking to frame million-dollar pictures don't patronize Chestnut Hill Framing Inc. because he possesses special technology, a unique location or the lowest prices in town. "The reason they come to my shop is because of me," says the Chestnut Hill, Massachusetts, entrepreneur.

Twenty of Friedman's 42 years have been spent designing and crafting frames for discerning clients who pay as much as $20,000 for them. He knows how to build relationships with customers, understands what they want, and executes their desires in an impeccable fashion. That's why Friedman has resisted temptations to enter higher-volume businesses, such as framing inexpensive posters, or expand his 11-year-old business beyond its single location. "I can't duplicate myself," he says. "And I have a good thing going."

You probably wouldn't call him humble, but Friedman is smart, says Christopher Zook, head of Worldwide Strategy Practice for management consulting firm Bain & Co. and co-author of Profit From the Core (Harvard Business School Press). In the book, Zook and co-author James Allen argue that one of the most beneficial things entrepreneurs can do is find ways to expand that build on their strengths while avoiding those that don't.

Sure, that may sound obvious, but entrepreneurs tend to stray from their core, frequently in disastrous ways. Even Dell Computer Corp., regarded as nearly flawless in refining and executing its direct-sales strategy, suffered when it veered into selling computers through retail stores in the early 1990s, Zook notes.

Why do entrepreneurs make the error? Hubris is one reason, explains Zook. Entrepreneurs think because they've done well in one field, they'll do well in another, without appreciating the special qualities that helped them or their businesses succeed thus far. In cash-strapped small companies, Zook adds, an unexpected opportunity to snare additional revenue in a business far from the company's core often proves irresistible.

Do What You Do Best

Napoleon is supposed to have said, "He who seeks to be strong everywhere will be strong nowhere." Regardless of whether the Little Corporal uttered the words-some believe they were spoken by a Chinese general-it's true that the essence of strategy is in picking one or two areas to be strong in and letting the rest slide somewhat.

Harvard Business School professor Robert Kaplan says most businesses should pick a strategy from among three broad areas: operations, product leadership and customer relations. Operational excellence is represented by McDonald's, which excels at serving food quickly, cheaply and consistently. Product excellence is represented by a company such as Intel, which dominates the world microprocessor market because few competitors can match its extensive technological resources. Customer relationships are focused on by firms such as American Express, which stresses the membership aspect of using its financial services. "You can't be all things to all people," Kaplan notes. "Even a big business can't."

Focusing on one area doesn't mean you can ignore the others. "You have to be good at two of them and excel at one," Kaplan says. "If your customer relationships and products are poor, the fact that you sell cheap doesn't carry the day."

Zook says you should pick areas to concentrate on based on your existing strengths. For instance, you may have channel dominance, in the way Dell dominates direct sales of computers. You may have technological dominance, such as that exhibited by Intel. It may be operational excellence, knowledge of customers or other critical assets, such as key locations, patents or brand names. And if you do diversify your company, make sure the areas you choose to expand into play to those strengths, he stresses.

For an entrepreneur like you, deciding where to focus may be as simple as knowing, like Friedman, why people choose you. Once you figure that out, the strategy can last you a long time. Zook notes that Michael Dell started out more than 15 years ago assembling computers in his dorm room from off-the-shelf components, then selling them directly to end users. "It's interesting," says Zook, "that that very simple core, a product assembled from the best components and sold direct, is still the Dell strategy today."


Austin, Texas, writer Mark Henricks has covered business and technology for leading publications since 1981.

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