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Diversity or Single Focus– What’s the Correct Business Model?


Listen to one business organization guru and you’ll hear you should set up your business with at least three separate and distinct profit centers – like a three legged stool. The rationale is that if one leg gets weak, your business will still stand and survive. That theory makes perfect sense to many smart business owners. It’s why many marketers have structured their business with many different profit centers. For their business model, they have at least three different and distinct businesses under their umbrella.

Listen to another business guru, however, and that person may say single focus is the key to success. Forget three legs and just get one single business nailed. So then you hear about marketers specializing in only one sector. When it comes to your family business, which one is right?

In my opinion, it’s actually both. In order to win in today’s fast-paced marketplace, it takes focus. Your company must get extremely good at one particular thing. But that “thing” isn’t a business sector, it’s a business core competency. So I agree that the key to business is focus, with the twist of mastering one competency and then moving that into the three-legged stool theory.

Put It Into Action

To translate this idea of focus to action, take a moment to write down – make a list — of what you estimate are the most important competencies in your present business. You might include things like customer stratification, inventory monitoring, purchasing, customer service, promotion or marketing, dispatch and routing, bid preparation, invoicing, credit determination, merchandising, employee development, leadership training, systems development, site selection, etc. Don’t censor yourself. There is no right or wrong – just list all the needed competencies that come to mind.

Next, narrow that list to what you determine are the three most critical competencies to the overall financial success of your business. Then, give yourself a grade from A+ to F in each of the areas. If you have at least one A+, congratulations! You are ready to take the next step. If no A+ in any of your three most critical competencies, pick one and focus until you can honestly give yourself that top grade. It will be the most important action you take. In today’s marketplace, you won’t be able to survive with Bs and Cs in critical competencies. Go get the education, skills, and resources to drive at least one core competency to an “A+” level.

Take Your Next Step

With your top competency identified and honed, now is the time to move into the three-legged stool theory of organization. Only you’re going to develop those legs with industry sectors or even outside businesses that use and capitalize on your best core competency. This is where you need more minds and to solicit input from professionals outside of your industry as well as your peers. You want to explore different ways to flex your core competency muscle.

Let me give you an example to stretch your thinking. You may have heard of an engine remanufacturing company called Springfield Remanufacturing. On the verge of bankruptcy, a group of managers scraped up enough money to purchase an ailing division of International Harvester that was to be shut down. With a great deal of education and sweat, they managed an enormous turnaround but more importantly, they realized one core competency — employee business education. That led to development of leg number two, a company called The Great Game of Business, which then led to leg number three, the concept of partnering with employees into new businesses! If CEO Jack Stack had thought in terms of only engines and parts, this empire which has created thousands of jobs and tremendous wealth would not have come to fruition

To think beyond your current boundaries, start with your outside CPA and attorney and discussion about your core competency. Do they agree? If so, what businesses do they know or even know of where this competency is needed but lacking? Next, go to your peers or even suppliers. Within your community, does any company need your skill set? If so, this is opportunity knocking.

Go Back to Focus

Once you have determined the world of possibilities, it’s time for choice and that laser-sharp focus once again. Select only ONE new venture, and put all your focus on that single endeavor until you’re achieving at the A+ level. Then revisit your list, add to it if necessary and add leg three.

By using this cycle of first focus, then building diversification via a strong core competency, and then so forth, you can and will develop a true powerhouse that will withstand all storms. Both business gurus were right – you must have dogged single focus, and you must diversify risk using the multi-leg approach. Focus is what will keep the your legs balanced and functioning together.

Meridian Associates has been partnering with family-owned businesses for over 30 years to remove barriers, accelerate business growth, build their legacy, and reduce stress levels. With three, high-impact business events each year, The CEO Exchange, Women in Family Business, and The Family Business Intensive, we continually provide best practices & proven strategies that keep multigenerational businesses thriving. Discover how Meridian can help your business thrive through our combination of high impact business coaching, advisory, M&A, and precision company valuations by visiting or calling us at 817-594-0546.

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