By Len Monheit
I’ve observed many examples of organizations making strategic decisions regarding line or service extensions as they build revenues and market share. Just like many other companies, at NPIcenter, we’ve had to define our offerings and focus on our core competencies and mission. And the corporate world is not the only sector where decisions must be made; government, academia and associations all face similar dilemmas.
In the technology sector, new providers come under pressure to be a ‘whole product’, a total solution fulfilling a customer’s entire need in a particular area. In other sectors including product supply, companies are pressured to become a “one-stop shop”. When offering complex or large solutions, organizations are encouraged to sub-contract to offer a more complete program, either in services or product scope offered. Examples include marketing firms working together to develop a multi-media program or a distributor of raw materials or manufactured goods offering larger lines to buyers to reduce the numbers of vendors that must be contracted.
I had a discussion this past week with a raw material distributor. This company represents less than ten principals, each with perhaps three to four key products. His sales force and his clients know the principals well; the relationships are excellent. The very next day, I had a conversation with another distributor, who was sourcing on behalf of an existing client to meet a critical production requirement, something he does frequently to reduce the number of vendors his clients deal with. Both have long-standing relationships with their clients and both are successful—with vastly different approaches.
The decision to be a specialist and focused supplier or to be a total solution provider is a strategic one, and there are circumstances when roles may change. Understanding your role and limitations as well as you understand your core competencies is critical. Many groups in this industry try to be too much and fail on all fronts. While you want to provide the best service for your clients or members, you do disservice when you bite off more than you can chew. Sometimes too, it’s better to partner to provide a larger program rather than reinventing the wheel.
One of my mentors described his company’s early days as the “anything for a buck” days. Typical of many entrepreneurs, he attempted to satisfy client demands even if these demands led him in many strange directions, away from his own strategic objectives. In fact, he confessed, he really subverted his objectives to his client’s wishes. And he made money on most projects. The problem came several years later when he tried to redefine his company as it matured. His company never developed economy of scale and each project was a unique adventure and growth was hampered as was the company’s ability to service its top flight customers. In fact, his clients only remembered the latest adventure, not his history of providing them with solutions in crisis after crisis. Eventually, he focused the organization on five key service areas that met 80% of his client’s needs. He developed partners and alliances to offer a complete solution when this was required. In his dealings with his clients, his relationship management matured as did his mission and understanding of his core competencies. This business professional became a much more valuable resource for a larger base of more satisfied clients. Word of mouth in any small community is critical and in this case, this company became an internationally renowned company in its defined space.
In this industry we often see companies, organizations and associations losing a sense of objectives, capabilities and core competencies. Wanting to maximize service, value or revenues, they build out in many different directions at the same time. When they are forced to step back and analyze, they see themselves losing touch with their mission and value proposition. In challenging times, this is even more prevalent as companies chase dollars and new business, often reacting to financial news with little thought to strategy and planning.
The irony of the situation is that the challenging times demand even more thought, strategy, planning and a focus on core competencies. Careful selection of alliance and strategic partners helps too.