Throughout my career I have had the opportunity to work with a number of companies and clients. Early in my career, I earned my stripes working in larger organizations, primarily as a profit center manager in the insurance industry. This provided a perspective on the challenges faced by big companies trying to shave a few points off its expense ratio or steal a fraction of a percent market share from a competitor. Over time, especially as I began to do more consulting work, I experienced life in smaller companies including numerous startups. This is an entirely different world altogether, where survival is often the primary short term objective.
Regardless of the size of the organization, I have observed 2 qualities that significantly increase the likelihood of success: focus and discipline. Others may say “operational excellence” or “people” are the biggest factors in driving success, however my experience suggests these attributes are by-products of focus and discipline or, at the least, difficult to achieve when there is a lack of focus.
Some of the basics I learned at Columbia Business School related to the fundamental discipline of market strategy, often hammered home via writings from Harvard’s Michael Porter. It goes something like this:
- Identify (and validate) a market need for a product or service
- Assemble a set of products and services that specifically address these needs
- Attack the market with unwavering discipline and focus
- After you’ve had a chance to assess the prospects for long term success, re-evaluate and repeat
Unfortunately, most companies skip step 3 or, at the least, compress this cycle into a [almost] daily activity. Usually, the temptation of a prospect with deep pockets or some other distraction will divert the focus of the organization while it branches out into a self-rationalized engagement. Meanwhile, resources of the organization are re-directed away from the original focus, watering down the ability of the organization to deliver best in class products and services to that segment. Unfortunately, saying “no” takes discipline and far too many CEO’s lack this quality in today’s short term world.
Of course, at some point you have to evaluate step 4 above and ask if you are on the right path. However, this should be a rigorous process executed with the implication that a change in course requires a significant investment over an extended period of time. This evaluation shouldn’t occur at weekly staff meetings or in response to a sales prospect that appears on the radar screen and wants something “a little different” than what you offer. If the sales prospect is too large to be ignored, then the organization should decide at that time if this new offering is the better way to move forward and re-channel its energy in this direction. Again, if this is done too often, employees will become confused and frustrated and you’ll have little change of actually developing any intellectual property or expertise.
When we started Kemper Auto and Home in 1996, as a direct marketing subsidiary of Kemper Insurance, we were certain that direct mail was the way to go. After all, that is what we knew and it seemed like a reasonable model if we could keep expenses down. Unfortunately, we learned within the first few months that times were changing and our assumptions regarding response rate were way off. We executed step number 4 at that time and decided to focus on the internet. We invested heavily in the web site, hitting remote rating servers, real-time communication with underwriting agencies, etc. Within 2 years we became one of the leading providers of auto insurance on the web (through relationships with portals such as Insweb). We did a nice job of adjusting course and focusing our energy.
However, we didn’t follow this formula about 2 years later. We allowed the prospect of writing a big chunk of business through an airline carrier affinity relationship to divert our attention. We weren’t in the affinity insurance business (a completely different underwriting and pricing model) and we got burned. We lost focus. It almost brought the company to its knees. Fortunately, we were able to scramble to get out of the relationship and re-direct the resources back to the internet business before it was too late. But it set us way back in our plan and schedule.
This experience had a profound re-enforcing impact on my academic learning. Unfortunately, I see it occur over and over.
