We all marvel at the innovation and value that Apple has created in the past decade. But the lesson I take away from Apple is the power of focus. Apple basically has only five products, yet it generates $65 billion in revenues and has a market capitalization of almost $300 billion! One thing that Apple has alway resisted is to proliferate their brands or product lines. The iPad is just the iPad – you can choose different capacities and connectivity options, but there is only one brand. It is the same with the iPhone and the iPod. Contrast this with Samsung in the mobile device business. It has dozens of sub-brands including Instinct, Galaxy, Captivate, Epic, Fascinate and so on. The result – each of these brands has limited awareness and weak brand equity. The benefit of focus for companies like Apple is that they are able to put “more wood behind fewer arrows”. They can focus their resources in fewer brands and products. Companies like Sony, Samsung and Microsoft need to learn from this. They have thousands of products and hundreds of sub-brands. We see the same phenomenon in packaged consumer goods, in retail, in pharmaceuticals, in technology as well as in financial services.
Companies need to pick lenses through which they choose to focus. The lens may be a geography, a vertical market, a brand, a product category or a channel. Consider an example: in the case of Fonterra Foods (a dairy products company based on New Zealand), they chose the Foodservice channel (selling to restaurants and other commercial food establishments) as a lens to focus their growth efforts. While they narrowed their focus on the channel front, they offered a broad range of dairy products through the Foodservice channel. Dell used a channel focus (direct to consumer). Southwest Airlines has focused on the domestic market and on one type of aircraft (the Boieng 737) for 40 years. Enterprise Rent-a-Car has focused on a segment (Replacement cars for customers whose cars are being repaired or have been stolen). The insight – if you want to broaden your revenues, you have to narrow your markets!
Focusing doesn’t mean you are selling less. On the contrary, you are actually increasing scale but you are doing it in carefully selected areas. Therefore, if you pick a few brands to focus on, you need to take them to the world. And if you are going to pick a few markets then sell everything into those markets. So, you do need to pick the lens and then you need to drive that to scale through organic growth as well as through acquisitions. What companies have to assess is the product of the number of products, categories, brands, markets, geographies and channels the company has in its portfolio. For instance, a company may have thousands of products, but if they are all focused on a couple of vertical markets like health care and manufacturing, then they are still a focused company. But, if you have complexity along multiple dimensions, then it is quite likely that you have exceeded the point of diminishing returns and are unfocused.