Selling too many products or services typically results in a watered down, mediocre product, and leads to lower profits and decreased company value.
How did Apple get back to profitability when Steve Jobs came back in 1997? They slashed their line of dozens of computers to just four – desktop and portable versions for professionals and for consumers. Focusing on fewer products allowed Apple to efficiently focus on making the best product in each category, and to create a very clear and powerful brand. Within one year Apple went from a $1 billion loss to a $300 million profit. That’s the power of focus in business.
Here are six reasons to get focused, and to specialize in doing one thing better than anyone else:
It will increase your profit margins
When you focus on one product or service, you can pour all your research & development and marketing dollars into making a unique and premium product. Your product will be differentiated and command a higher price, which will boost your company’s profits and value.
You can create a stronger brand
With one product/service, it’s much easier to tell a clear story in your marketing and sales efforts. Multiple product lines require multiple brands, which gets confusing and expensive in a hurry. This is particularly difficult for smaller companies with limited resources.
You’ll be findable on Google
When you Google “helmet camera,” Go Pro is featured in just about every listing, despite the fact that there are hundreds of video camera manufacturers. It’s easy for Go Pro to optimize their website for the keywords that matter when they are focused on selling only one product.
Nobody cheers for Goliath
Small companies with the courage to focus can take on the big dogs – and get the benefit of our love for the underdog. When Gatorade first came out with the energy drink, they were a small player with a unique product that grew quickly. They competed successfully against other drink options such as soda pop. Gatorade was eventually acquired by Pepsi and has now faded into the larger universe of Pepsi products and similar energy products from other companies.
Every staff member will be able to deliver
When you do one thing, then you can train your staff to execute well in making and delivering it. You can focus on continuous improvement and thereby stay ahead of the competition. The owner and managers are also freed up to focus on the big picture – which leads to greater company value.
It is easier for the acquirer to see the value in your company
Selling a company successfully requires painting a clear picture of the present and future for the buyer. When you specialize in one product or service, then it’s easier for a buyer to see the fit with their products or services. It makes for an easier and more successful integration with their company. The risk of acquisition is lower, so the value is higher.
Diversification may work for the large multi-nationals, but for small to mid-sized business it generally leads to mediocrity. Stay focused to achieve higher profits and increased value at lower risk.