How narrow should my focus be?

Q: We are starting an OEM optical-components company that sells into many industries. Should we focus on a few or many applications?

A: The right thing to do depends a lot on how you run your business; the devil is in the details. As a startup company you have limited resources and the key to success is to maximize the impact of whatever resources you possess. So, serving a few strategically selected key customers really well is the right thing to do. The likely scenario is that by serving one segment of the industry really well, you will have built a great business infrastructure and also a great reputation to enable you to penetrate additional markets with relative ease. By then you will also have adequate resources to do things right. Another way to focus your resources is to serve several segments but focus only on the opinion leaders of each field. In this case you can have your cake and eat it too, to gain broad name recognition and also exposure to a variety of business opportunities. In either case, what you do not want to do is scramble for business without choosing your customers strategically, or respond to your customers’ every whim without first qualifying the needs and quantifying the market size. We should have learned from the “bubble” that sometimes you just have to say “no” nicely to customers who have good intentions but who make you do the wrong thing, defocusing your resources and resulting in doing nothing right even for strategic customers.

A: Wow! I can only fall back on business principles since this line of business is definitely outside of my dynamic range. The competitive advantages you described in your business plan are not strong enough to get your business off the ground before competition catches on. The better equipment you boast can soon be duplicated or even improved upon. The “mom and pop” saloon you described is certainly different from the way you intend to run your business, but it is also possible that their way is tried and true and works just fine for that kind of business. I also think the business may not be very scalable, because you’ll have to hire qualified people to run the stores, and they can be hard to find. I also note that there is no one on your team who came from that kind of business to qualify as an industry insider. It is likely you will encounter potholes you have not even imagined. For all I know, you may even run into local gangs or even organized crime in this line of business. I simply do not know enough to give you good advice.

A: That depends a lot on the working relationships you have developed over time with each director. I am actually not sure you are barking up the right tree because what you want to do is a bit like trying to solve a problem by calling a meeting. Meetings are NOT for solving problems, but for building consensus and for fine-tuning solutions that have been worked through thoroughly. What I am saying is that you need to do your homework, brainstorm with experts in the areas you want penetrate, and provide your directors with several business plans to pick from. Of course, you can have one-on-one discussions to get input to solidify your thinking and to bring people on board. What I have found, even in the Q&A in this column, is that people generally are not looking for input; they are looking for approval of what they have already decided they want to do. Brainstorming is often an exercise to win a debate to have it their way. If this has been your pattern in the past, I can understand why it would be difficult to engage your directors.