Out of Control You may think you're on the right track, striving for excellence in all areas. But are you heading for disaster?

Bobby Friedman understands that art collectors looking to framemillion-dollar pictures don't patronize Chestnut Hill FramingInc. because he possesses special technology, a unique location orthe lowest prices in town. "The reason they come to my shop isbecause of me," says the Chestnut Hill, Massachusetts,entrepreneur.

Twenty of Friedman's 42 years have been spent designing andcrafting frames for discerning clients who pay as much as $20,000for them. He knows how to build relationships with customers,understands what they want, and executes their desires in animpeccable fashion. That's why Friedman has resistedtemptations to enter higher-volume businesses, such as framinginexpensive posters, or expand his 11-year-old business beyond itssingle location. "I can't duplicate myself," he says."And I have a good thing going."

You probably wouldn't call him humble, but Friedman issmart, says Christopher Zook, head of Worldwide Strategy Practicefor management consulting firm Bain & Co. and co-author ofProfit From the Core (Harvard BusinessSchool Press). In the book, Zook and co-author James Allen arguethat one of the most beneficial things entrepreneurs can do is findways to expand that build on their strengths while avoiding thosethat don't.

Sure, that may sound obvious, but entrepreneurs tend to strayfrom their core, frequently in disastrous ways. Even Dell ComputerCorp., regarded as nearly flawless in refining and executing itsdirect-sales strategy, suffered when it veered into sellingcomputers through retail stores in the early 1990s, Zook notes.

Why do entrepreneurs make the error? Hubris is one reason,explains Zook. Entrepreneurs think because they've done well inone field, they'll do well in another, without appreciating thespecial qualities that helped them or their businesses succeed thusfar. In cash-strapped small companies, Zook adds, an unexpectedopportunity to snare additional revenue in a business far from thecompany's core often proves irresistible.

Do What You Do Best

Napoleon is supposed to have said, "He who seeks to bestrong everywhere will be strong nowhere." Regardless ofwhether the Little Corporal uttered the words-some believe theywere spoken by a Chinese general-it's true that the essence ofstrategy is in picking one or two areas to be strong in and lettingthe rest slide somewhat.

Harvard Business School professor Robert Kaplan says mostbusinesses should pick a strategy from among three broad areas:operations, product leadership and customer relations. Operationalexcellence is represented by McDonald's, which excels atserving food quickly, cheaply and consistently. Product excellenceis represented by a company such as Intel, which dominates theworld microprocessor market because few competitors can match itsextensive technological resources. Customer relationships arefocused on by firms such as American Express, which stresses themembership aspect of using its financial services. "Youcan't be all things to all people," Kaplan notes."Even a big business can't."

Focusing on one area doesn't mean you can ignore the others."You have to be good at two of them and excel at one,"Kaplan says. "If your customer relationships and products arepoor, the fact that you sell cheap doesn't carry theday."

Zook says you should pick areas to concentrate on based on yourexisting strengths. For instance, you may have channel dominance,in the way Dell dominates direct sales of computers. You may havetechnological dominance, such as that exhibited by Intel. It may beoperational excellence, knowledge of customers or other criticalassets, such as key locations, patents or brand names. And if youdo diversify your company, make sure the areas you choose to expandinto play to those strengths, he stresses.

For an entrepreneur like you, deciding where to focus may be assimple as knowing, like Friedman, why people choose you. Once youfigure that out, the strategy can last you a long time. Zook notesthat Michael Dell started out more than 15 years ago assemblingcomputers in his dorm room from off-the-shelf components, thenselling them directly to end users. "It'sinteresting," says Zook, "that that very simple core, aproduct assembled from the best components and sold direct, isstill the Dell strategy today."

Austin, Texas, writer Mark Henricks has covered business andtechnology for leading publications since 1981.

Contact Sources

• Chestnut Hill Framing Inc.
  (617) 739-0991, chframe@ma.ultranet.com
• Worldwide Strategy Practice
  www.profitfromthecore.com