The importance of focus

The last seven days have been marked by the topic of focus. I have met a significant number of people who want their businesses to sell everything at the same time, without much consideration for solving specific problems or the cost of selling everything. It gets a bit frustrating, knowing that the initiative will fail.

The rule of thumb is to market in a niche and grow from there.

Let’s use the idea of real estate, which is complex enough to display the focus system and its pitfalls. Caveat… in the absence of clear statistics, this has to be a qualitative model.

Most real estate agents will sell any property, ranging from urban mansions and urban land to industrial properties and farms. Lower-priced houses will be sold, but the higher-priced properties will be the first prize. One sale brings in a larger proportion of income compared to a lower priced property. Understandable.

However, this creates a position of undifferentiated competition. All real estate agents compete with the offerings of all other real estate agents. At the same time, the competition can occur across a spread of geographical locations. The net effect is that competition becomes fragmented, more time-consuming and more expensive.

In the example of the real estate agent, only a few people will be able to afford the multi-million dollar houses, but many people will want the sub-million dollar houses. The real-estate agent will have to spend more time convincing the high-budget purchaser, while the purchaser of a more affordable house will get short shrift.

The profit on the high budget house will have a lower economy of scale as those houses are also fewer. On the other hand, the more affordable house will have the potential of greater economies of scale. As there is a greater demand (at least in urban Namibia) the seller of affordable housing can develop a selling model that is efficient by virtue of practice making perfect.

The fact that something can be done, does not mean that it should be done. A clear example of this is the case of Colgate foods. I am sure the reasoning on the development of the food products was that both food and dental hygiene are oral phenomena, however food tanked.

Namibia is crying out for diversification, but it needs to be handled well. A successful enterprise indicates entrepreneurial acumen so make use of it where it exists. However, it needs to be treated as separate entities. A bank can create divisions to deal with related financial needs but should it enter and be linked to the realm of online retail? At least one bank is heading in that direction. Another is giving short shrift to an initiative that it launched a couple of years ago.

Focus happens in the context of an industry which contains different sets of needs. To develop focus, understand the difference between needs. A person who wants an affordable house does not want an expensive house, so don’t go there.

Also ensure that the focus is stated and visible. If the market cannot understand that you solve a particular problem, they will not make their way to your offering. Communication of your focus must be persistent.

Your focus is a strategic asset. Use it to the best of your ability for more efficient operations, economies of scale and greater profitability.