My buddy David lost his job at a very large bank recently. His position was eliminated. He has a very mature, philosophical perspective on what happened. And his email to me on the topic is full of about as much business wisdom as you could squeeze into a paragraph.
“I see business as a series of concentric circles, like an bullseye target. The center is the core of the business and each circle represents a new market, further away from the core business. For energy derivatives at the bank, we kept expanding into “new” markets, which may receive praise from the business school cognoscenti, but in reality may be more of a death spiral or at least an exercise in diminishing returns. In the energy derivatives world, we focus on oil and gas drillers (center of the circle), then move to utilities, then large industrial business, and then finally small companies and governments which is where I was working. The further away we moved from the core of the business, the more energy that must be put into each dollar of revenue. Lower margins result and at some point, more energy/time/money is going in than is coming out. Growth grinds to a halt. That’s why I am not mad that I was laid off; I was working on the margins and it made sense that I be let go. Public companies have no real choice but to grow. Forcing themselves into new markets. This results in a constant ebb and flow of hirings and layoffs. Private companies get to play a different game.”
So David was operating in the outer circle of the target you see above. He makes a fascinating observation about public companies having no choice but to grow, so they wind up broadening their scope quite a bit to chase new markets. But private companies….well, we don’t have to lose focus. We can keep a laser focus on that middle circle, and never look elsewhere. But you know what the funny (or unfortunate) thing is? We seem to be so hard wired in America to lose focus and try to hit every circle. Heck, we even try to hit all circles in several targets – all at once. So even tons and tons of small businesses aim all over the target. I guess it just seems like the “smart” thing to do. You’ve got to “diversify”. But why?
For example, Wes, Tyler, and I can’t finish telling somebody what Schedulefly does before they are asking us if we have thought have expanding into “new markets.” Why do we only focus on restaurants? Now, if our market was tiny and already saturated, I’d understand. But even when we tell them that our market is gigantic (for a small business with three people) and virtually untapped, most people don’t get it. Sure, they may nod and say, “Yeah, that makes sense.” But you can tell in their voices and see it in their eyes that they think we are clueless. They think we just captured lightening in a bottle and we don’t know what to do with it.
Maybe that’s the case. But I could go on for days about why its so important for us to focus. Think about it. We live, eat, sleep, and breath the restaurant niche. I don’t have a clue what a retail store owner thinks when he hits our web site. But I am 100% positive that when a restaurant owner visits our site, we’re speaking her language. And I’m positive that we are the best at what we do – for restaurants. So since there are a few hundred thousand restaurants out there, most of which still use paper-and-pencil (or Excel) to create weekly staff schedules, and a tired cork board (or a heck of a lot of phone calls) to communicate important messages, I can’t think of any reason to get distracted – for even 5% of our time – and start going after the red, blue, black, and white circles. That yellow circle just looks gigantic to us, and we’ll keep aiming at it until it’s completely full.
Focusing On The Bullseye,