Onevery peculiar thing that we have noticed about most companies is that they want to be generalists so that they can sell everything to everyone. They call it covering all bases. Sounds good in theory but it does not always pan out in the real world because people tend to perceive specialists as having better knowledge or being better in their field. So, when there is a lot at stake, what would you do? Would you buy from a generalist that sells everything or would you buy from a specialist? Probably a specialist, unless what you are buying is not really that critical – meaning that the wrong choice would not adversely affect your business.
For example, if you are buying floor cleaning detergent for your office, it might not be important if you buy from a generalist or specialist (unless you are running a hospital). But when you buy a critical new firewall system to protect your server from hackers, you will probably want to buy from a specialist in firewalls. An interesting pastime for you if you have nothing else to do might be to watch these very same generalist companies when they buy products or services that are critical to their businesses. You will probably find that the generalists tend to buy from specialists, too! Why? Because they perceive specialists to be better than generalists isn’t that a fascinating phenomenon? Think about it. When you sell, you try to sell everything. When you buy, you want to buy from people who specialize in that thing that you want to buy.
Observe your own company and how it behaves when it tries to sell and when it tries to buy. There probably exists a tendency to try to be everything to everyone. When companies are under pressure to grow quickly, many are drawn to line-extensions. The thinking is: The more products we have to sell, the higher our sales revenue. That is why a look at the companies listed on the Singapore Exchange will show you that many companies engage in all kinds of unrelated businesses. But when your company needs to buy something, would it buy from a generalist or a specialist?
Specialization is a powerful differentiator because people tend to perceive specialists to be more knowledgeable, but being a specialist means you need to be focused.
It is funny how our definition of focus is different from most companies. When we meet companies at our seminars, we like to ask them what their area of focus is. Many would give us answers such as, “Oh, we focus on four areas. One, property development. Two. high-end Italian restaurants. Three, luxury goods retailing. Four, waste management. These are the tour core businesses that we are focused on.” When we hear something like that, we are usually tempted to say, “Whoa, Nellie”‘ That is not being focused at all. “Focus” means you do one thing and one thing only. And you try to do that one thing better than anyone else in the world. When you have four very different and non-complementary businesses like property, food and beverage, retail and waste management, you are diversified.
What is wrong with being diversified? Nothing, provided I you are big enough to pull it off. Diversification requires a lot of money, resources and people, and only big companies can spare those. Small companies need to focus on their core business. They need to specialize. But even big companies should keep to their area of specialization because being diversified means that you have to deal with more competitors. In the example that we mentioned above, this company probably started out in property development and over time branched out to restaurants, luxury goods and waste management. Every time it branches out into a new area, it takes on more (and very different) competitors. That makes life tougher than it already is. For what? Furthermore, the 80/20 rule usually applies to diversified companies such as this. You will often find that in diversified companies, the area that contributes the most in terms of revenue and profits will still be the original business.
TWO THINGS HAPPEN WHEN YOU SPECIALISE
You know the saying “Practice makes perfect”, right? There is truth in this saying. Just look at the best sportsmen and sportswomen in the world. All of them practice hard from a very young age. David Beckham is acknowledged as one of the best free kick specialists in the world. He has talent, but he also practiced really hard when he was a kid by drawing targets on a wall and trying to hit them with a football. “Practice makes perfect” works on the principle of specialization. It makes you focus on doing one thing over and over again until you get it right. You cannot stray into other things that are unrelated. You keep your eye on the ball and work it till you get it right. After all, if you want to be good at something, you have work at that something until you are good at it.
If you are not specialized, you become a “Jack Of All Trades, Master of None”. Have you ever seen a person who can play all kinds of musical instruments? Initially, it looks impressive that this person can play the piano the guitar, the violin, the drums and a few other instruments that you can’t even name. But will he or she be the best in any one of them? Probably not, because this person is anything but specialized. To be a world-class violinist you need to specialize in the violin. You can’t play the violin and the guitar (even though both are string instruments) and expect to be world-class in both. Well, we admit there might be some truly gifted musicians in the world who can do that but those are the exceptions rather than the rule. For the rest of us, if we want to be good at something, we need to focus. We need to be specialists.
The same principle applies in business as well. When you are specialized, the first thing that happens is that you become very good at what you do because you are doing the same thing over and over again. YOU can’t help but become goad at it. Furthermore, by being specialized, you would have made all the mistakes that anyone could make in your area of specialization and learnt `from them to make all the improvements necessary to become Unbeatable that is the beauty of specialization. You get to know all the things that work and those that don’t. We are not saying that being specialized will make you the best but it will certainly get YOU a long way down the road to perfection.
Secondly, other people will also begin to see you as good at what you de because they think that if you are only doing that one thing day in, day out, you must be quite good at it. That is why specialists are often regarded as having more knowledge and more expertise. When you need to have a replacement valve for your heart, do you go to a general practitioner or a specialist? When you need your house renovated, do you just go to any contractor or to a specialist interior designer? Even generalist companies that try to do everything under the sun buy from specialists. When generalists do not want to buy from other generalists, what does that tell you about being a generalist brand? It lacks credibility.
Generalist brands are perceived as having less knowledge and being less expert. That may not necessarily be true but it does not matter what the truth is — all that matters is perception, and if you are a generalist brand, you will not be perceived as good in what you do. For example, even if you can find a general practitioner who can perform heart surgery as well as any heart surgeon, would you trust the general practitioner to perform heart surgery on you? Why not?
That is why when you buy, you look for specialists, especially when you are buying a B2B product that costs a lot of money and is critical to your business. That specialist may not necessarily be better than a generalist but you are not going to take that chance, are you? So, what makes you think your potential clients will take a chance on you if you are a generalist? They might risk it if you offer a very good price. But, everything else being equal, the specialist wins. Here is an interesting exercise for you to do if you are a generalist brand that sells everything. Pick one of your products or services and offer it to a client for the same price that a well-known specialist is charging. Will your clients still buy from you? Why not? Even if you are as good as the specialist, people are usually not willing to pay more for a generalist brand. When you buy wine from supermarkets, you expect to pay less, even for the same brand of wine that a specialist might sell because a supermarket is a generalist.
We experienced the same thing with our firm. In one instance, we found ourselves pitching for several B2B branding projects where we were up against some of the biggest brand consulting firms in the world but we secured four out of five projects. When Wilson asked the CEOs of these companies why they chose us when they could have used the big boys (and our fees were approximately the same), they said, “Because you are a B2B branding specialist. We feel more secure appointing a specialist.” That does not mean that we win all the B2B branding projects that we pitch for, but can you imagine what it would be like if we were not specialized altogether and we had to pitch against bigger consulting firms?
IF YOU ARE SMALL, YOU’D BETTER SPECIALISE
Specialization is not an option when you are a small company. For example, if you are a small logistics company with a turnover of around US$100 million (S$150 million) and you claim you can offer everything that FedEx can — and FedEx is a logistics company with a US$35 billion”‘ (S$52.5 billion) turnover, do you think people will see you as a credible brand? Probably not. It is ensure possible (although quite unlikely) that you can be as good as FedEx, but People will simply not believe it. A US$100 million (S$150 million) company is not small but it may be comparatively small by the standards of the industry. People will think, “If you are a small company, how can you possibly do everything that FedEx offers and be as good?”
So, if you are small, you have to specialize. You have to apply the principle of force made famous by the legendary Prussian military strategist, Karl von Clausewitz, ” which states that: “When the war is governed by the urge for a decision … such a decision may be made up of a single battle or a series of major engagements. This likelihood should he enough to call for the utmost possible concentration of strength. A major battle in a theatre of operations is a collision between two centers of gravity; the more forces we can concentrate in our centre of gravity, the more certain and massive the effect will be.
Wait a minute. If we apply this principle to marketing, the big guys will always win because they have a bigger army! Not necessarily. Clausewitz said that the more forces you can concentrate in one area, the more, likely you are to be successful. In the earlier example of that diversified company with four very diverse businesses, where is it concentrating its force? It may have more resources than you but these resources are spread out over a wide area. If You are a smaller company, you can still beat a bigger rival by concentrating your forces fully on one area – preferably an area where your bigger rivals are relatively weak. That requires specialization.Excerpted from ‘Killer Differentiators’ by Tai and Chew Page 242-246