Book: Focus

"Focus" by Al Ries

Overall Theme: The central argument of the book is that focus is paramount for success in business and marketing. Companies that try to be everything to everyone, through line extensions, diversification, or lack of a clear identity, ultimately dilute their brand and weaken their position in the market. In contrast, businesses that concentrate on a specific niche or concept and "own" a word or idea in the consumer's mind are more likely to thrive.

Key Concepts and Ideas:

1. The Dangers of Line Extension and Diversification:

• Definition: Line extension refers to expanding a brand name into new product categories. Diversification is when a company ventures into completely unrelated industries.
• Problem: Both can lead to a loss of focus and brand dilution. The author provides many examples of failed attempts at diversification or line extensions.
• Examples:Virgin Group's extensions beyond airlines: "The Richard has licensed the Virgin name for personal computers and has set up joint ventures to market Virgin cola and Virgin vodka...On the drawing boards are Virgin water...and Seven Virgins, a fizzy lime beverage."
• Donna Karan's expansion: "In one year Donna Karan spawned five new companies: men's wear, DKNY men's and kids, intimate apparel, plus a beauty company that started life with Donna's own personal perfume."
• Liz Claiborne's struggles after numerous line extensions: "Back in the eighties, Liz Claiborne was the single most popular label in women's apparel... Today Liz Claiborne is in trouble...to refocus the clothing lines at the moribund apparel firm."
• Philips's forays into computers, cable TV, and video rentals leading to significant losses.
• Daimler-Benz's diversification beyond cars into jets, helicopters, trains, and satellites, resulting in financial losses: "During the eighties, Daimler-Benz got into everything from jets to helicopters to trains to satellites...In 1995, the company lost substantially more than $1 billion."
• Japanese conglomerates (Hitachi, Toshiba, Sony, etc.) spread across numerous industries, resulting in low profitability.

1. The Power of Owning a Word/Category in the Mind:

• Concept: Successful brands "own" a word or concept in the customer's mind, making them the first brand that comes to mind when the category is mentioned.
• Examples:Kodak owns "photographic film."
• Xerox owns "copier."
• Wrigley owns "gum."
• Heinz owns "ketchup."
• Pizza Hut, KFC, and McDonald's own "pizza," "fried chicken," and "hamburgers," respectively.
• Bayer owns "aspirin."
• Coke owns "cola."
• Campbell's owns "canned soup."
• Polaroid owns "instant photography."
• Samuel Adams owns "microbrewed beer."
• WD-40 owns "slippery": "Today the WD-40 Company owns the word 'slippery' in the mind."
• Importance: Owning a word provides a powerful advantage, influencing customer perception and driving sales. "What drives success is not factories, facilities, products, or people. What drives success is owning a piece of the prospect's mind."

1. Focusing Something (Even If Not Everything):

• Key Idea: Even if a company can't focus on only one product, it must focus on something, such as a specific customer segment, distribution channel, or geographic area.
• Examples:Foot Locker focusing on athletic shoes.
• Starbucks focusing on coffee.
• "Nails only" salons.
• Sunglass Hut focusing on sunglasses.
• Dunkin' Donuts focusing on donuts.
• Baskin-Robbins focusing on ice cream.

1. Stocking in Depth:

• Concept: Specialty stores that focus, also stock in depth, providing a larger variety of options.
• Examples:Toys "R" Us stocks 18,000 toys, versus 3,000 in a department store.
• Blockbuster carries 5,000 video titles versus 1,000 at a mom-and-pop video store.
• Dunkin' Donuts sells 50 kinds of donuts.
• Starbucks sells 30 kinds of coffee.
• Baskin-Robbins sells 31 ice cream flavors.

1. The Quality Axiom: High Price = High Quality Perception

• Concept: Consumers often equate higher prices with higher quality. It's difficult to convince customers that you can offer high quality at a low price due to "cognitive dissonance."
• Example: Mercedes-Benz vs. Cadillac. "One reason is that a Mercedes-Benz can cost twice as much as a Cadillac."

1. The Importance of Specialization:

• Concept: Specializing in one area can lead to dominance.
• Examples:
• Snap-on Incorporated specializes in tools.
• Medeva PLC concentrates on drugs that treat a narrow range of ailments, especially bronchial conditions like influenza and asthma.

1. The Multistep Focus:

• Concept: A company can have multiple brands/products, each targeting a specific segment or distribution channel, but still maintain an overall focus. This creates a "ladder" of products.
• Examples:General Motors' car brands (Chevrolet, Pontiac, Oldsmobile, Buick, Cadillac) under Alfred Sloan, each targeting a different income level.
• "Chevrolet is for the hoi polloi, Pontiac for the poor but proud, Oldsmobile for the comfortable but discreet, Buick for the striving, and Cadillac for the rich."
• Darden Restaurants (Red Lobster and Olive Garden), focused on different cuisines.
• VF Corp (Lee and Wrangler jeans), targeting separate markets with separate headquarters for each.
• Sara Lee's L'eggs, focused on supermarket distribution, as opposed to Hanes in department stores.
• Gillette's razor ladder (Trac II, Atra, and Sensor).
• Anheuser-Busch's beer ladder (Busch, Budweiser, and Michelob).

1. Spin-offs as a Way to Regain Focus:

• Concept: Spinning off unrelated business units can allow each entity to focus on its core competencies and improve performance. "A split should be designed to improve the focus of the individual business units. If it does this, increased stock prices will follow."
• Examples:Duracell's success after being spun off from Kraft.
• US West's plan to separate its regulated telephone business from its media businesses.

1. The Inevitability of Division and the Danger of Convergence:

• Concept: Instead of industries converging, they will continue to divide.
• Examples:The computer industry dividing into personal computers, portables, laptops, notebooks, palmtops, pen computers, workstations, supercomputers, super minicomputers, fault-tolerant computers, fault-tolerant minicomputers, parallel processing computers.
• The beer industry dividing into domestic beer and imported beer, regular beer and light beer, draft beer and dry beer, expensive beer and inexpensive beer, red beer and ice beer, even nonalcoholic beer.

1. The Importance of a Strong Name and Avoidance of Generic Names

• Concept: A strong name can help a company be successful. A generic name can harm a company.
• Examples:"Kiwi International Air Lines" was a bad name.

Cautionary Tales:

• Newsday's failure in New York City: "Over a ten-year period the paper won three Pulitzer Prizes and lost $100 million."
• IBM's loss of focus after becoming a computer generalist: "When IBM was a mainframe specialist, it had a powerful perception of quality...Today, IBM has become a computer generalist. As a result, IBM has lost its perception of inevitability."
• Blockbuster's attempt to expand into music: "Instead of setting up a ladder with separate steps, Blockbuster has taken the well-traveled path toward an unfocused company."

Conclusion:

"Focus" argues persuasively that in a competitive marketplace, a clear and well-defined focus is crucial for building a strong brand, capturing market share, and achieving long-term success. Companies must resist the temptation to diversify or extend their brand too broadly and instead concentrate on "owning" a specific concept in the minds of their target customers.

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