The old adage about not putting all your eggs in one basket may be outdated, except for clumsy Easter bunnies. From a business standpoint, owners are consistently advised to nurture a diversity of revenue streams, a customer list that’s not too reliant on one company and, in some cases, divergent industries.
It’s a way to hedge your bet. If one product doesn’t work out, you still have revenue from another two or three. If your customer base is balanced, you don’t risk 80 percent of your revenue walking out the door when your best customer drops you. If one of the industries you serve starts to flirt with trouble, you can ramp up your efforts in another. Makes sense, right?
Not always. During the last two weeks I’ve heard two business speakers stress that intense focus may be a better approach. One keynoter used Southwest Airlines as an example, noting that contrary to conventional wisdom in the airline industry, the carrier flies only one type of jet, the Boeing 737 series. So what’s the big deal about one jet? For starters, it saves Southwest a whopping amount in maintenance— the airline doesn’t need to carry an assortment of parts in inventory, and any of their mechanics can fix the plane. And any of their pilots can fly it. Plus, when they have to take a plane out of service, they just replace it with another 737 since 737s fly on all their routes. Southwest’s focus on a “one plane fits all” approach has been critical to the company’s success while other airlines have floundered.
Next up was Toilet Paper Entrepreneur author Mike Michalowicz. He came to Kansas City last month carrying a similar message for the attendees of our Thinking Bigger Speaker Series. His latest book, The Pumpkin Plan, correlates the methods of farmers who grow colossal pumpkins to business owners who grow successful businesses. Colossal pumpkin farmers focus all their attention on growing the colossal pumpkin, killing off the other pumpkins so the one pumpkin can receive all the water, all the nutrients, etc. He encourages business owners to cut away the distractions, including firing some customers, to focus all their energies and resources on whatever has the potential to be the colossal pumpkin for their business. (You can listen to my interview with Mike here.) One surprising example he used was Proctor & Gamble. He said that decades ago when they started, they had just two products: soap and candles. They thought two products diluted their focus and scrapped the candles, opting instead to focus on Ivory soap – and they originally sold it only to the military. One product, one customer. Once they mastered that, they built from those successful roots into the colossal giant they are today.
So, as we wind up this year and think about ways to ensure 2013 is successful, don’t overlook that sometimes the best way to Think Big (or grow colossal pumpkins) is to simplify.