For years business books have preached "focus". Getting the business to understand its "core", and then focusing on that "core" has been the theme of books from "Competing for the Future" to "Good to Great." It's almost become a foregone conclusion that the best business practice is to focus.
But when markets shift, it's the focused competitor that hurts the most. Just look at the auto companies. Things have turned badly for auto manufacturers. In November, sales were down some 30% + to levels not seen since October 1982 (26 years ago) (read article here).
But a closer look is revealing. GM sales down over 41%, with revenues at its most recent acquisition - Hummer - purchased to increase revenues in the auto business down over 62%. Ford was down 31%, helped by a less decline in its pick-ups. Chrysler down a whopping 47%. Toyota down almost 34%, Nissan over 42% and Honda more than 31%. With numbers like that, you have to be concerned for all auto companies.
And that is where you can smile and be glad that one of these companies chose not to "focus." Unlike all those other companies, Honda doesn't just make and sell cars. It sells manufactures and sells motorcycles, boat motors, snowmobiles, lawn mowers, electric generators, snowblowers, leaf blowers, robots and jet airplanes. It sells directly to customers, sells through traditional retailers, has distributors and dealers. This distribution of business provides Honda multiple opportunities to grow, rather than constantly trying to Defend & Extend its car business. Can you imagine any of the U.S. car manufacturers saying it has that many different products, or multiple sales channels?
In the early 1980s GM started down this future-oriented road. It once owned EDS, and was the largest supplier of IT services globally. GM once owned Hughes Aircraft, making it the largest manufacturer of aircraft avionics. These businesses offered GM the opportunity to grow beyond autos and the struggles the company had with unions and dealers. But, in order to "focus" GM sold both EDS and Hughes – and used the money to Defend & Extend its focus on cars. Just look how that turned out for investors and employees.
"Focus" is highly overrated. Early in a business's life cycle focus is necessary in order to create a Success Formula that helps the company grow. But, as time passes the Success Formula becomes increasingly at risk of market shifts which jeapardizes returns. The best way to avoid getting trapped in low returns is to keep your eyes on the future, and make sure you keep White Space alive building new opportunities to exploit future market opportunities. It would have been easy for critics to attack Honda for being in so many businesses – but in times like these having multiple businesses pushing into future growing markets reduces the problems from severe market shifts.
