Focus

Focus Plot Summary

Introduction

In today's hypercompetitive business landscape, companies face a paradoxical challenge: the pursuit of growth often leads to their downfall. While conventional wisdom suggests that expansion, diversification, and capturing broader markets represent the path to success, evidence increasingly points to an opposite truth - that strategic concentration, not expansion, creates sustainable competitive advantage. This counterintuitive principle forms the foundation of focus theory, which argues that companies achieve their greatest success not by broadening their scope but by narrowing it. Focus theory challenges executives to make difficult choices about what their companies will not do. It demands the courage to sacrifice potential opportunities in service of a clearer, more compelling market position. Through systematic examination of corporate successes and failures across industries, we discover that focused companies consistently outperform their diversified competitors in profitability, market share, and long-term sustainability. The principles of strategic concentration apply across organizational contexts - from positioning products in consumers' minds to navigating technological disruption, from corporate restructuring to global expansion. By understanding these principles, leaders can transform their organizations from unfocused conglomerates into precision instruments designed for market dominance.

Chapter 1: The Danger of Unfocused Growth

The pursuit of growth represents both the driving force and the greatest threat to corporate America. When companies face pressure to increase annual sales and profits, especially in stagnant markets, they typically respond by expanding their offerings - adding product varieties, entering new markets, acquiring companies, or forming joint ventures. This expansion process, whether labeled as line extension, diversification, or synergy, inevitably causes companies to become unfocused, diluting their market position and undermining their competitive strength. This pattern of unfocusing appears to be a natural organizational phenomenon, occurring almost without conscious effort. Successful companies typically begin with intense concentration on a single product, service, or market. Over time, they gradually expand their scope until they become unfocused - offering too many products and services across too many markets at too many price points. This progression mirrors the concept of entropy in physics, where closed systems naturally move toward increasing disorder unless energy is applied to maintain organization. Like a meticulously organized closet that becomes chaotic within weeks, corporations naturally drift toward disorder without deliberate intervention. Two primary mechanisms drive this unfocusing process: diversification and line extension. Diversification, once celebrated as management wisdom, has been largely discredited through decades of disappointing results. Companies that proudly proclaimed their "three-legged stools" of diversified businesses discovered that these structures rarely provided the stability they promised. Financial services proved particularly alluring for diversification, with companies from Sears to Westinghouse entering the field only to retreat after substantial losses. Despite overwhelming evidence of its failures, the diversification impulse remains strong among executives seeking growth beyond their core markets. Line extension represents an even more pervasive threat to organizational focus. When companies take a successful brand name and apply it to new products, they appear to leverage existing brand equity while minimizing risk. This approach seems logical and often generates short-term sales increases. However, line extensions typically fail in the long run when facing focused competition. The marketplace becomes saturated with extensions in declining categories where they aren't needed, while new brands are starved for resources in growing categories where they could thrive. This misallocation of resources undermines both current market positions and future growth opportunities. The consequences of unfocused growth extend beyond marketing concerns into operational inefficiency and strategic confusion. When companies attempt to be all things to all people, they inevitably spread their resources too thinly across disparate businesses. Management attention, always a scarce resource, becomes fragmented across competing priorities. Decision-making slows as executives attempt to balance the needs of increasingly diverse business units. Meanwhile, focused competitors can concentrate their resources on specific market segments, gradually eroding the unfocused company's position through superior execution and clearer value propositions. The path to sustainable success lies not in diversification but in concentration - finding strength in focus rather than weakness in breadth. As one successful executive observed, "I'd rather be strong somewhere than weak everywhere." This principle, though counterintuitive to growth-oriented managers, represents the fundamental insight that drives truly exceptional business performance. Companies that resist the natural tendency toward unfocused expansion and instead maintain disciplined concentration on their core strengths consistently outperform their diversified competitors in both profitability and long-term market position.

Chapter 2: Owning a Position in the Mind

The most powerful competitive advantage in business comes not from superior products or services but from owning a distinct position in customers' minds. This principle applies equally to individuals and organizations - to achieve lasting success, you must own a word or concept in the collective consciousness of your target audience. While this approach seems deceptively simple, it represents a profound insight into how the human mind processes and retains information in an overwhelmingly complex marketplace. The human mind, despite its remarkable capacity with billions of neurons and complex neural networks, must navigate an environment of overwhelming choice and communication. A typical supermarket contains thirty thousand products, a drugstore fifteen thousand, and a department store forty thousand. The average person consumes nine hours of media daily, processing approximately forty thousand words per day or fourteen million words annually. In this overcommunicated society, the mind copes by dramatically simplifying incoming information, reducing complex realities to basic associations and perceptions that may have little connection to objective facts. This simplification process explains why market leaders maintain their positions even when competitors offer objectively superior products. Ask consumers why they purchase Kodak film, and they rarely provide technical specifications or performance data. Most simply respond, "Because it's the best." When pressed on how they know it's the best, they typically answer, "Because everybody knows it's the best." This circular reasoning reveals that leadership itself creates a perception of quality that becomes self-reinforcing. If Fuji were the largest-selling film in America, most consumers would consider it "the best" - just as Japanese consumers prefer Fuji because it dominates their home market. Market leaders literally own their categories in consumers' minds. When you think "ketchup," your mind automatically jumps to "Heinz." The association is so powerful that brand names often become generic terms through a process linguists call "telescoping." People say "kleenex" instead of tissue, "xerox" as a verb for photocopying, or "band-aid" instead of adhesive bandage. This transformation represents the ultimate achievement in positioning - when your brand becomes synonymous with the entire category. While trademark lawyers fight against this genericization, it actually represents the residual effect of leadership, the most powerful position a brand can occupy. Companies that aren't category leaders must develop strategies that acknowledge and work around the leader's powerful position. The most effective approach involves narrowing your focus to own a specific segment or attribute within the category. While Pizza Hut owns the pizza category broadly, Little Caesars focuses specifically on "takeout" and Domino's on "home delivery." This specialization allows these companies to develop distinct identities and value propositions despite competing against a dominant leader. When you have established this focused position, you can dramatically increase effectiveness by taking it one step further - owning a specific word or concept in the mind. Federal Express demonstrates this principle perfectly. After struggling with a conventional "better and cheaper" strategy against established competitors, the company refocused entirely around "overnight" delivery. This singular focus transformed their advertising, operations, and corporate culture. Their new theme - "When it absolutely, positively has to be there overnight" - communicated their position with crystal clarity. The company achieved profitability in July 1975 and never looked back, becoming one of America's most successful businesses by owning a single word in the collective consciousness. This ownership of "overnight" created a powerful driving force both inside and outside the company, aligning employees and customers around a clear, compelling value proposition.

Chapter 3: The Art of Strategic Sacrifice

The most significant barrier to effective corporate strategy lies in the deeply held belief that companies must appeal to the entire market. This expansionist mindset leads organizations to waste enormous resources pursuing "non-customers" - people who have fundamental reasons for not buying their products. While conventional wisdom suggests that broadening your appeal will increase business and profits, the counterintuitive truth is that narrowing your focus typically produces superior results. Understanding this paradox requires recognizing the futility of universal appeal and embracing the power of strategic sacrifice. In competitive markets, no brand, company, or corporation can achieve 100% market share. This limitation stems not from marketing failures but from fundamental human psychology. There are essentially two types of customers in any category: those who want to buy the same brand as everyone else, and those who deliberately choose different brands. This variation reflects category-specific preferences rather than consistent personality traits - the same person who chooses the market leader in automobiles might select an obscure brand of coffee or clothing. This psychological diversity ensures that even the most dominant brands face natural market share limitations. Sacrifice represents the essence of effective strategy. Without sacrifice - deliberately choosing what you will not do - there is no strategy at all. When you sacrifice potential customers, products, or markets, you're not giving up opportunity; you're defining your position with clarity and conviction. A powerful way to establish this position is by clearly identifying who you are not and what you don't offer. In politics, this principle is well established. Candidates who state their positions clearly and vigorously attack opponents establish distinct identities that voters can understand and evaluate. Those who attempt to appeal to all sides appear wishy-washy and typically fail to inspire sufficient support. Companies could learn much from political strategists. Anytime you stake out a clear position, you automatically create opposition to something else. Without enemies, you have no distinct position in the marketplace. When Emery refocused its shipping business on packages weighing over seventy pounds, it established a clear contrast with Federal Express: "Why do business with FedEx? They're good for documents and small packages, but we're the experts in handling the big stuff." This positioning created a compelling reason for customers to choose Emery for specific shipping needs while acknowledging FedEx's strength in other areas. The preference for specialists over generalists represents one of the most consistent patterns in consumer behavior. When facing important decisions, people naturally seek specialists rather than generalists. If you experience heart problems, you consult a cardiologist rather than a general practitioner. When shopping for shoes, you visit a dedicated shoe store rather than a department store. This preference extends across virtually all product and service categories, creating opportunities for focused companies to dominate specific market segments. The rise of health maintenance organizations (HMOs) created openings for physician practice management companies (PPMs) that specialize in mediating between doctors and insurance providers. Even hospitals have discovered the power of specialization, with facilities like St. Francis in Roslyn, New York, promoting themselves as "the heart hospital" and achieving remarkable results. Companies that attempt to enlarge their markets by better serving segments where their share is small typically lose focus and ultimately surrender market share to more specialized competitors. This decline doesn't happen overnight - there's a delay factor as core customers gradually feel neglected in favor of the broader market. Eventually, focused competitors recognize the opportunity and target these neglected customers with specialized offerings that better meet their needs. The lesson is clear: Rome wasn't ruined in a day, and neither are market-leading companies. The erosion of focus typically occurs gradually through seemingly rational decisions that collectively undermine the organization's strategic clarity and competitive advantage.

Chapter 4: Navigating Technological Change

Technological change presents one of the most challenging strategic dilemmas for established companies. When disruptive innovations emerge, organizations face a critical decision: fight the change, embrace it, or attempt some middle path. The art of effective management lies in anticipating these shifts and aligning your company with the emerging future rather than clinging to fading paradigms. However, this doesn't mean change for change's sake - companies that get into trouble aren't changing too slowly but in the wrong direction. When facing technological disruption, companies typically consider five potential responses, four of which can be effective when properly executed. The least successful approach, yet paradoxically the most popular, involves keeping "a foot in both camps" - offering new technology alongside existing products and letting customers decide. This strategy appeals to executives because it seems logical and prudent, avoiding the risk of abandoning established revenue streams while exploring new opportunities. Theodore Levitt's classic "Marketing Myopia" article reinforced this thinking by suggesting that railroads failed because they defined themselves as being in the railroad business rather than the transportation business. However, this dual approach typically fails because it unfocuses the company and confuses customers. When organizations attempt to serve both traditional and emerging markets simultaneously, they rarely excel at either. While customers might initially trust the established company's offerings in the new technology, they eventually turn to specialists who demonstrate greater commitment and expertise. This transition accelerates because technological shifts create psychological permission for customers to change brands or providers. When families experience substantial income increases and seek larger homes, they rarely build in the same neighborhood. Similarly, when Chevrolet owners decide to upgrade, they typically switch to Oldsmobile or Buick rather than purchasing a more expensive Chevrolet. The second approach involves putting "both feet in the new camp" - completely abandoning the existing business to embrace the emerging technology. This strategy focuses organizational attention and resources on the future rather than dividing them between competing paradigms. It's difficult to generate excitement about a new product line when maintaining the old one "just in case." Philip Morris demonstrated this approach when transforming Marlboro from a women's cigarette to a men's brand in 1954, completely abandoning the previous positioning. This decisive shift worked brilliantly, with Marlboro eventually becoming America's largest-selling cigarette and a global powerhouse. The third approach keeps "both feet in the old camp" - deliberately maintaining tradition while competitors chase technological trends. While conventional wisdom suggests that rapid change is always desirable, sometimes resisting change helps companies develop unique market positions based on consistency and heritage. Jack Daniel's bourbon, Levi's 501 jeans, and Zippo lighters have all thrived by maintaining their traditional offerings while competitors constantly modified their products. Zippo's commitment to its classic lighter design hasn't hindered growth - over an eight-year period, the company's average annual sales increased by more than 20%, demonstrating that tradition can become a powerful competitive advantage in a world of constant change. The fourth effective approach puts "both feet in the new camp with a new name" - creating a completely new brand identity for the emerging technology. The classic example is Haloid Company, which transformed into Xerox Corporation when entering the photocopier market. When executed correctly, this name change can be accomplished with remarkable results, as demonstrated by Landmark Education Corporation emerging from Werner Erhard & Associates. The new name signals a fundamental break with the past, helping customers understand that this represents something genuinely different rather than an extension of existing offerings.

Chapter 5: Breaking Up to Build Stronger Businesses

Decades of mergers, acquisitions, and conglomeration have created numerous hydra-headed corporate monsters that struggle with unfocused operations and diluted market positions. The solution to this problem is conceptually simple: spin off some of the heads. Divide and conquer. While this approach seems straightforward in theory, it faces significant resistance in practice, primarily due to psychological rather than economic factors. The fundamental obstacle to corporate spin-offs lies in the mindset of top executives, who typically equate size with importance, power, and personal status. Even when IBM was losing billions, John Akers remained CEO of a $60 billion computer corporation. Similarly, when General Motors lost $23 billion, it still topped the Fortune 500 list. While spin-offs represent a rational management tool for creating shareholder value and organizational focus, they require leaders to voluntarily reduce their empire's scope - a sacrifice few executives willingly make without external pressure. This resistance is gradually changing as corporate spin-offs gather momentum, driven by investor demands to unlock hidden values, tax advantages, and mounting evidence that both parent companies and their spun-off subsidiaries typically outperform the market. A watershed moment occurred in 1995 when ITT Corporation announced plans to split into three separate companies, followed by AT&T's similar announcement three months later. These high-profile examples demonstrated that even the largest corporations could benefit from strategic division rather than continued expansion. The performance of spin-offs has been remarkably positive. A J.P. Morgan study examining seventy-seven spin-offs from 1985 through 1995 found they outperformed the broader stock market by more than 20% on average during their first eighteen months as independent entities. When Marriott Corporation split into Host Marriott Corporation and Marriott International, the market valued the original company at approximately $2 billion. Following the separation, the two companies' combined market capitalization reached approximately $6 billion, creating substantial value for shareholders through increased focus and strategic clarity. The hotel-casino industry provides particularly compelling examples of value creation through corporate division. The Promus Companies split into Promus Hotel Corporation and Harrah's Entertainment Inc., allowing each business to concentrate on its distinct operational requirements and growth opportunities. Hilton Hotels Corporation announced plans to separate its hotel and gambling operations, recognizing the fundamental differences between these businesses despite their superficial similarities. Bally Entertainment followed a similar path by separating its fitness centers from its hotel-casino operations. These moves make strategic sense because hotels and casinos operate according to different business models and attract different customer segments, despite often occupying the same physical structures. Chemical companies have also embraced spin-offs to enhance focus and shareholder value. Eastman Kodak spun off its $4 billion chemicals business as Eastman Chemical Company, allowing both entities to concentrate on their distinct markets and technologies. Dow Chemical sold its prescription drug business, recognizing the fundamental differences between pharmaceutical development and chemical manufacturing. W.R. Grace spun off its National Medical Care subsidiary, creating two focused companies better positioned to compete in their respective markets. These tax-free transactions allow organizations to concentrate on their core competencies while creating substantial value for shareholders through increased strategic clarity and market alignment.

Chapter 6: Perception vs Reality in Quality

The quality axiom represents one of the most deeply entrenched beliefs in business: to increase sales, you must improve your product or service because the better offering will inevitably win in the marketplace. This principle seems so self-evident that it rarely faces critical examination. Like all axioms, it becomes invisible through universal acceptance - nobody questions what everybody knows. However, this unexamined assumption often leads companies astray by focusing attention on objective quality improvements rather than quality perceptions, which ultimately drive consumer behavior. Quality has achieved iconic status in contemporary management thinking. At last count, 87% of American companies practice some form of total quality management (TQM). Nearly 80% of U.S. managers believe quality represents a fundamental source of competitive advantage. The Malcolm Baldrige National Quality Award has become the most prestigious recognition a company can receive. Yet despite this overwhelming consensus, a critical question remains largely unaddressed: What exactly is quality, and who determines it? Consider how customers actually evaluate quality in real-world purchasing situations. When someone shops for a television, do they open each set to examine the circuitry? Do they carefully read technical specifications and compare engineering details? Rarely. They might briefly compare picture quality, but in most cases, they can't discern meaningful differences between similarly priced models. Instead, they rely on proxies for quality - brand reputation, salesperson recommendations, and especially market leadership. Customers believe the better product will win in the marketplace; therefore, the best-selling product must be the better quality product. This circular reasoning creates a powerful advantage for market leaders regardless of objective product differences. The disconnect between objective quality rankings and market performance appears consistently across industries. Consumer rating services extensively test products like automobiles and rank them according to objective quality measures. Yet there's rarely correlation between these quality rankings and sales rankings. The highest quality cars often aren't the best sellers, and the best sellers frequently aren't the highest quality according to objective measures. This paradox exists because perception, not reality, drives consumer behavior. The real driving force in business isn't quality but the perception of quality - a distinction that fundamentally changes how companies should approach product development and marketing. When you focus a company, you automatically improve its quality perception through four distinct mechanisms. First, the specialist effect creates the impression that focused companies possess deeper expertise and commitment to excellence within their narrow domain. Second, the leadership effect associates market dominance with superior quality through the circular reasoning described earlier. Third, the price effect leverages the widespread belief that higher prices indicate higher quality, allowing focused companies to command premium prices that reinforce quality perceptions. Finally, the name effect demonstrates how a well-chosen brand name can enhance quality perceptions independently of product characteristics. The strategic implication is clear: while manufacturing quality products remains important, companies should prioritize improving quality perceptions rather than obsessing over marginal objective improvements. This requires a fundamental shift in thinking for many organizations. Drive for quality in the plant, but putt for quality perception in the mind. This distinction explains why companies with superior objective quality sometimes fail while those with superior quality perceptions thrive. By understanding this principle, organizations can allocate resources more effectively between actual product improvements and perception-enhancing activities like branding, positioning, and focused market leadership.

Chapter 7: Focus in Global Markets

The dramatic expansion of global trade represents the most significant business trend of our era. As trade barriers fall through treaties like GATT, NAFTA, APEC, and Mercosur, countries worldwide are aggressively pursuing export opportunities. This globalization fundamentally changes competitive dynamics across industries, creating both opportunities and threats for established companies. The most counterintuitive impact of globalization is its tendency to unfocus businesses even when they make no changes to their product lines or market approaches. This paradoxical effect becomes clear through a simple analogy. In a small Wyoming town with fifty residents, you'll find one general store selling everything from groceries to hardware. In New York City with eight million people, you'll find highly specialized retail establishments - not just shoe stores, but men's shoe stores, women's shoe stores, children's shoe stores, and athletic shoe stores. The larger the market, the more specialization naturally occurs. As business moves toward a truly global economy, companies must become increasingly specialized to maintain competitive advantage. The generalist approach that might succeed in limited markets becomes untenable in the global arena. Different industries are globalizing at varying rates. The cola industry, computer industry, and commercial airplane industry have already achieved essentially global status. Visit any major city worldwide and you'll see billboards advertising the same multinational brands: Sharp, Canon, Samsung, Xerox, Philips, Marlboro, Shell, IBM, and Coca-Cola. This convergence demonstrates how global competition drives companies toward increasingly focused strategies that can be deployed consistently across diverse markets. The most successful global companies have clearly defined positions that translate effectively across cultural and geographic boundaries. The economic benefits of international trade are well established. East Asian economies demonstrate what can be accomplished through global focus. Japan, Taiwan, Hong Kong, Singapore, and Korea have achieved remarkable prosperity through export-oriented strategies that leverage their comparative advantages. This success has driven virtually every significant business toward world markets, creating a fundamental choice: either compete against imports in your home market or compete globally in increasingly sophisticated international markets. Either approach requires greater focus than was necessary in protected domestic environments. While many companies have benefited from globalization, others are being rapidly unfocused by misunderstanding the long-term implications of free trade. The principle of specialization applies relentlessly: The larger the market, the more specialized a company must become to prosper. When we achieve truly free trade worldwide, every company will need to specialize to survive. Yet many organizations, particularly in Europe and Asia, see globalization as an opportunity to broaden their product lines rather than narrow them. This fundamental misreading of market dynamics explains why many seemingly powerful conglomerates struggle in global competition. The contrast between American and international corporate structures illustrates this principle. Of the top ten corporations in the United States, only one (General Electric) represents a classic conglomerate. Of the top ten corporations in Japan, eight are conglomerates. Six of Japan's top ten corporations are sogo shosha, or trading companies, accounting for nearly one-fourth of Japan's GDP yet operating on paper-thin margins with net income less than one-tenth of 1% of sales. Similarly, Korea's economy is dominated by four giant chaebols - Samsung, Hyundai, LG, and Daewoo - that make everything "from chips to ships" but struggle to achieve global competitiveness in most categories.

Summary

The power of focus represents the most fundamental yet frequently overlooked principle in business strategy. When companies concentrate their resources, attention, and identity on clearly defined market positions, they consistently outperform diversified competitors in profitability, growth, and long-term sustainability. This strategic discipline requires the courage to make deliberate sacrifices - choosing what you will not do - rather than pursuing the conventional path of expansion into adjacent markets and product categories. The focused corporation achieves its strength not through breadth but through depth, developing unmatched expertise and market leadership within its chosen domain. As markets continue to globalize and competitive intensity increases, the principle of focus becomes even more critical for organizational success. Companies that maintain disciplined concentration on their core strengths will thrive in this environment, while those attempting to be everything to everyone will find themselves outmaneuvered by specialists in virtually every category. The future belongs not to conglomerates but to focused organizations that understand their unique value proposition and communicate it consistently across all touchpoints. By embracing the power of strategic concentration, companies can transform themselves from unfocused entities struggling for relevance into precision instruments designed for market dominance and sustainable competitive advantage.

About Author

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Al Ries

Alfred Paul Ries was an American marketing professional and author. He was the cofounder and chairman of the Atlanta-based consulting firm Ries & Ries with his partner and daughter, Laura Ries. Along with Jack Trout, Ries is credited with resurrecting the idea of "positioning" in the field of marketing.

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