This post was inspired by the recent WSJ article of the same name. Of course it’s a question we are constantly asked. In fact it is a deceptively important question that extracts some pretty weak answers. Ask a panel of CEOs at a conference to articulate what their company does and its often not pretty.
As the article brings out so well, Ingersoll-Rand PLC is a world leader in creating and sustaining safe, comfortable and efficient environments ie it makes locks and air conditioning equipment! Obviously the bigger you are the more difficult it is to find that laconic phrase that defines you. Or how about DXP Enterprises describing itself as a leading products and service distributor focused on adding value and total cost savings solutions to MRO and OEM customers in virtually every industry since 1908. DXP distributes, pumps, tools, nuts, bolts and safety supplies.
Let’s compare these identity definitions with some really fast growing private companies, all of these companies are growing at 50% to 1000% per year –
- 37 signals – Making collaboration productive and enjoyable for people every day. Frustration-free web-based apps for collaboration, sharing information, and making decisions (formed in present form 2002, estimated 2010 Sales $60m)
- Carbonite – Unlimited Online Backup. One flat price. (formed 2005, estimated 2010 sales $30m)
- Smart Balance is committed to providing superior tasting heart healthier alternatives in every category it enters by avoiding trans fats naturally, balancing fats or reducing saturated fats, total fat and cholesterol. (acquired by present management 2007, estimated 2010 sales $300m pointing at $1Billion 2014)
- HubSpot offers inbound marketing software that helps businesses get found on the internet by the right prospects and convert more of them into leads and customers. (formed 2006, estimated 2010 sales $30m)
- Luke & Associates formed in 2004 and has grown exponentially to become one of the largest providers of health care for the U.S. military. (estimated 2010 sales $500m)
- Coyote Logistics, LLC is a third-party logistics firm which leverages proprietary transportation technology tools to create truckload, intermodal, LTL, ocean, and air based solutions that meet the operational demands of today’s challenging supply chains.(this piece is hidden but key: The company specializes in fleet backhaul, which utilizes client’s trucks to transport loads on return trips reducing the number of trucks transporting half or empty loads, to reduce emissions and overall carbon footprint) (formed 2006, estimated 2010 sales $500m)
- Service-now.com develops, implements and supports a suite of on-demand IT service management solutions offered via the Internet and modern software as a service (SaaS). (formed 2004 estimated sales 2010 $60m)
All these companies have a niche and are developing further niches around their core expertise. They are becoming global leaders, dominating a sliver of a much larger market. They have figured out what they are really good at, focused on a compelling story around a niche, validated that the market really needs it and violently executed with great skill. These private companies are the poster children for many entrepreneurs but they don’t need to be the exception. So many private and public companies settle for a safe, mediocre positioning, a safe story trending towards a commodity business instead of dominating a special space.
This vision thing, the overall compelling story, the unique market you aim to define and dominate is priority #1. Here are a few examples of why good and bad definitions leads to and bad consequences:
- GKN – (a UK $9 billion corporation) – made a decision in the 70s to focus on proprietary products based on unique technology globally not on a UK based steel commodity business. They acquired Uni-Cardan a German niche manufacturer of propshafts and key supplier to Volkswagen and set the stage for three decades of growth.
- Laidlaw, the largest school-bus operator in North America bought heavily into the ambulance business in the 1990s. Ambulances are not transport businesses they are medical businesses. Big mistake.
- GE announced in April last year that the Health Sector was a new focus for them and then a few days later announced a JV with Intel. The focus: independent living at home and independent/assisted living communities around the world.
- E-Bay selling Skype, Sara Lee focusing on food, Thermo Fisher Scientific focusing on scientific instruments have all helped bring purpose and direction to these large groups.
- Simplifying down your activities to focus on your special space brings outstanding success to all aspects of your business:
- SEO campaigns become easier as you know the key search terms to use to bring quality leads to your door
- Thought leadership papers and all collateral is able to zero in on targeted themes directly related to your expertise, pulling prospects towards you.
- Being clear on what you do so well, allows you to consider outsourcing your non core. You don’t need to own everything but you do need to control it.
- Product innovation becomes so much more focused on myopic slithers of market needs.
- Recruitment attracts believers from day 1.
- You stop measuring irrelevant detail. You are able to define big ugly strategic milestones worth hitting and more detailed Key Performance Indicators for your managers to achieve.
- In a world where everything starts to become “Social” and “Connected” then identity, who you are, becomes unreasonably important.
Clarifying and simplifying your vision and therefore who you are as a business is more important than ever. But this will still lead to declines if you just stick to your core. You need to stay flexible and focused on your market and continue to evolve.
To transform visions into remarkable businesses you must remember that the vision needs to be compelling to survive the journey.
Happy Xmas to all my readers and enjoy some time off if possible!