John Bell, in his book Do Less, Better: The Power of Strategic Sacrifice in a Complex World shows us how this applies to companies as well.
John was appointed CEO of a company that had lost its focus and diversified too much. He and his team then took the unpopular choice and sold off or closed all but a few of the product lines, keeping the most profitable ones. Although the board did not approve and John nearly lost his job for this, it ended up being exactly what the company needed to recoup and become profitable again.
John lists countless examples of both companies that remained focused and became brand names and those who lost focus and therefore lost their market advantage. He also shows how "doing less better" should be applied to—
- hiring less people: choose the ones that can really help you execute, even if they cost more; and
- working on less projects: choose the ones that will really make an impact.
Having this kind of focus, which is a result of the company's strategy, is the job of the CEO. And a clearly defined strategy—
- lets everyone know not only what to spend resources on, but what not to spend resources on;
- will help drive the company's priorities and culture; and
- help them differentiate and stay profitable in a fiercely competitive market.
As contrarian as it may seem, trying to add services and products is not the way to boost sales and profitability. Instead a company is better off figuring out what they do best and do more of that, better...and less of other things.
Can you think of a company that has diversified too much? Has your company or team fallen prey to this as well?