Discover more from Strategic Thinking
A Product For Everyone Or a Product For The Few?
Each strategy has its flaws and advantages
When the first iPhone appeared, the then-CEO of Microsoft, Steve Balmer, laughed at it (watch the video). Be careful what you say! As we know now, he was mistaken. Apple is still the smartphone market leader. The company has a relatively narrow smartphone range, and for a business of this size, it has a small assortment. So, it seems to be a good strategy.
Canadian company Research In Motion went even further. It concentrated on smartphones only (the brand name was BlackBerry). So did Taiwanese HTC. They chose the focus strategy, the one which many experts highly value. They believe it lets companies concentrate on the essentials and set aside secondaries.
But, as we can see, businesses do not always benefit from it. I guess you don't have a BlackBerry or HTC device in your pocket.
Both HTC and BlackBerry offered customers versatile and functional smartphones. But Apple, Xiaomi, Samsung, Oppo, Vivo, and Huawei squeezed them out of the market. Samsung managed to keep afloat and moved to the second position, not least because it manufactured a wide range of phones and smartphones, from the most affordable to luxury ones.
Xiaomi and Huawei follow similar strategies. Oppo and Vivo These compete in the field of relatively low prices yet still offer a vast range of products. Some companies produce highly specialized smartphones, but they are below the radar on the global market.
So, as we can see, the only company that focuses on the relatively narrow product range is Apple, but it operates in the high-end price segment. So what strategic lesson can we learn from it?
Concentrate or diversify?
If a company centers on one product or few ones, it allows it to polish it to perfection. And sometimes, it makes sense. Many years ago, I was choosing a precision machine for the factory I worked for as a CEO. The machine was so expensive, and this investment was so important for our company that I personally took part in negotiations.
Two suppliers got on the shortlist. One of them was an International behemoth and well-known B2B brand with branches in all developed countries. They produced a wide range of equipment for different purposes and any budget. Their sales reps looked like Wall Street bankers with their expensive suits and fancy ties.
Another one was a small family-owned Italian company that manufactured precision machines only. When I came to Italy, the firm's owner invited me for dinner. After an hour or so, I understood that precision machines were the only things he could think or talk about. They were his passion, the love of his life.
I was impressed by his enthusiasm, but, being a pragmatic CEO, I told him that I had some doubts about his company because they didn't have customer service in the country where I worked. What would we do if the machine got out of order?
The owner leaned forward, looked me in the eye, and said: "You don't need customer service because my machines never break down. You have my word."
I bought his machine and never regretted that decision.
But when we buy a new smartphone, laptop, car, pair of jeans, or armchair, do we always need a perfect, flawless, one-of-a-kind product? Good enough will be completely okay for most customers.
The problem of focused companies is that when they concentrate on a small number of products and improve them all the time, they may easily go beyond customer expectations. Unfortunately, excellence is never cheap, so these companies offer a unique quality for a high price, and few customers truly love it.
Focus strategy is one of the possible strategies that can lead a company to success. But if you opt for it, you have to realize that it is a risky strategy. One day you can find yourself trying to persuade customers to buy your state-of-the-art and expensive product when they object that they are pretty happy with their average solutions for a reasonable price.
Thanks for reading Strategic Thinking! Subscribe for free to receive new posts and support my work.