What is the Key to Your Business Success?

What is the Key to Your Business Success?
By Stephen A. Rutan

Strategic Focus is often the most powerful concept that your management team can use to guide their understanding of what it takes to succeed. Only six categories are required to define overall direction for most organizations. Let's take a look at how each area of strategic focus can provide a concise description of what makes your business tick.

1. Products/Services:

A company that is product or services focused derives its long-term success from a specific product or service. Most of what that company does centers around that specific product idea and how to make it better. As a total business, General Electric is very diverse and complicated. It is difficult to ascertain the strategic focus of such a complex corporation. At the divisional level, however, focus becomes more apparent: GE Aircraft Engine (still a considerably large business entity at over $11 billion in annual sales!) is product focused. Virtually all that they do is centered on the design, production and sales of jet engines.

2. Capabilities:

A company that is capabilities focused typically is involved with a broad array of products or services and a number of different customer types (hence, they are neither products/services nor markets/customers focused!). Their success is driven by their expertise in coordinating a number of different functions or capabilities. One of our client companies designs, prints, assembles and, in some cases, fills packaged items - a broad number of different capabilities. They succeed because they are very good at combining these individual capabilities to provide turn-key solutions for a variety of problems for a variety of customers.

In order to avoid becoming a "me too" player in a crowded competitive environment, a capabilities focused business differentiates itself by making sure that it has some specialized individual skills or processes. Just a few unique or uniquely mastered processes combined with a set of more commonly available capabilities can set a business apart and enable it to serve the specialty needs of select customer groups and earn superior returns.

3. Markets/Customers:

Companies with this strategic focus succeed because they direct most of their activities toward serving a specific kind of customer. They typically become very knowledgeable about that customer group's needs and preferences and organize their business to provide either very specific needs or, in some cases, a very broad array of that customer's product and services needs. For example, PetSmart is focused on serving the needs of pets (and pet owners!).

4. Technology:

Simply put, companies with a technology strategic focus succeed long-term because they have differentiated expertise in some area of technology. It is common that these firms have strong fundamental Research and Development capabilities - or at least strong applied technology development resources (i.e., they use and apply the basic research of others in a very specific technology area).

5. Raw Material Supply:

Companies with a raw material strategic focus succeed because they have intimate and extensive knowledge of how to turn natural resources or other materials into successful revenue streams. Think tree companies, steel companies, minerals companies, rubber companies. They know how to extract value from basic raw material sources.

6. Method of Sale/Distribution:

Companies focused in this area succeed because they have established a connection with their marketplace - a delivery or sales channel - and they win because they know how to funnel products through that channel. In the U.S., we have catalog retailers, home-shopping channels on TV, and door-to-door sales companies. They win because they have established a pipeline with an important customer group and, typically, find all manner of products to sell through that pipeline.

In addition to being able to identify your current strategic focus, it is critical to understand when and why you should consider changing it. Ten to fifteen years ago, Patterson Dental Company was clearly a customer focused distributor (a one-stop shop for dentists and dental labs). At some point, successful market share gains in this industry would have limited their options for additional growth. One of the keys to their competitive success was to execute distribution logistics better than their counterparts in the industry.

Today, Patterson Companies, Inc. also serves the needs of the veterinary and the medical rehabilitation markets. It is clear that management made a corporate decision to at least broaden the scope of their customer strategic focus (from "dentists" to "medical professionals"). If their next major growth initiative takes them outside of the medical profession, it would complete the shift to a capabilities focus driven by distribution logistics. The explicit proof of this is stated on their website: "Our mission is to establish Patterson as the premier value-added distribution company." Notice the striking absence of the mention of any specific customer group! This adjustment in their strategic focus has allowed them to grow from a $300 million dental industry distributor in the early 90's to a more broadly based $2.4 billion distributor today.

Choosing the right strategic focus for your company can have a powerful impact on your management team's ability to make both daily tactical and long-term strategic decisions. Consider making this discussion the leading agenda item at your next senior management meeting.

Steve Rutan is a Consultant with Center for Simplified Strategic Planning, Inc.
He can be reached via e-mail at

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