Tuesday, October 04, 2011

Blurring the Boundaries of Business

The Amazon Kindle Fire just set fire to the tech world. The pricing is exciting and the features very good. But what is a online merchant/ retailer doing with an Ipad competitor?

A few years earlier a software/ hardware manufacturer Apple had turned the music industry on it head by creating a gadget (ipod) which is made listening easy but more important that turned the distribution of music on its head. If that was not enough, Apple extended the same innovative thinking into a phone. the question was then whats a HW/SW company doing with phone? I don't think that really warrants an answer now!

The IT space has seen a transformation of sorts. IBM is a software services firm. Dell transcends both hardware and software and HP is confused. Consulting major Accenture has IT services and BPO wings.

Starbucks faces its biggest competition not from Caribou or Costa but from McDonald's and Dunkin Donuts. Whats a burger company doing with coffee? McCafe and I am told that do make a good cup of coffee.

In turn McDonald's faces its biggest threat from a brand which sells chicken - Col. Sanders creation - KFC aka Kentucky Fried Chicken which had its name shortened to expand into other categories than just chicken pieces. KFC sells some interesting burgers and other eats which directly takes the Big Mac head on.

If that was not enough, many brands especially in the premium and luxury space have transcended from their parent category to others. Benetton, FCUK, Nautica etc. has watches, foot wear amongst its product portfolio. Even in the formal/ semi formal space - CK, Louis Phillipe amongst others have transformed themselves into a wardrobe brand than just apparel.

Closer home we have many examples especially within large corporate houses both out of necessity due to the erstwhile licence raj and now out of choice. Be it the Birla's or Tatas, they have have fingers in various businesses. Infact the Birlas incubate new businesses through the existing ventures and then later spin it off.

The list is endless and I can fill a few pages on how brands have been extended into various categories. Al Ries will probably have to relook at his book " Focus" and probably have to rewrite to his book. Core Competency be damned, sorry Mr Prahalad.

The hunger for  more is what keeps business growing and this hunger can drive organizations to take turns which are not really a part of the core business. Some succeed and some don't.

While I do believe that Focus is important, given the dynamic nature of business today it has become important to look at alternative areas to grow. But as they say ' the grass is always greener on the other side' and this can result in mistakes which are detrimental to a company's growth.

All organizations cannot be an Apple or even a 3M. Interestingly organizations like these have a strong innovation led culture with healthy risk taking ability as a part of their DNA. This helps the organizations to adopt and adapt depending on the environment.

When the boundaries of business get blurred, organizations loose focus and a confused message goes out both internally and externally. Quite literally - a blurring of vision. A clear case is Starbucks which had to go back to its roots and stick to its core - coffee. And they soon got their customers back!

My take on this. As far as possible  each new venture should be treated as a separate company with a separate team otherwise there would be a tendency to carry the baggage of the past which cloud the venture itself. IBM is a good example - the software services arm was different from the HW division.


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