Playing to your strengths


It’s the start of our fiscal year, and I’m in the process of completing our budgets and business plans for the coming 12 months. There seem to be two clear styles in business.

Either extend your brand as far as you can or focus heavily on your core products. I’ve always been a fan of the former. I think it’s probably because I love new ideas and projects, and diversification enables me to pursue those thoughts. However, I’m increasingly of the opinion that, for the majority of us, focus is the way to clear value.

Johnny Boden speaks very eloquently on this subject, and tells of how he shut down Baby Boden because, despite seemingly very successful sales, the division was in fact a distraction without which the business would be stronger.

And yesterday I heard Michael O’Leary speaking about Ryanair, and whether he would follow the easyJet/Stelios approach of launching other products with the Ryan brand. He was, in his usual style, unequivocal on the subject: no, this would not be the approach for him. He sees very strong additional growth from his existing sector, and is having quite enough fun beating the majors at short-haul flying to see any need to go down that road. What he had to say about how unblinking focus can deliver profits growth was inspiring.

Take, for example, the issue of seats. O’Leary was asked whether there was any truth to a rumour that Ryanair was about to cut costs further by eliminating reclining seats. And it appears the rumour is true. But far from being the cheapskate route that cuts customer satisfaction, it seems over 90% of passengers would love for it to be impossible for the passenger sitting in front of them to move their seat back into their faces. Meantime Ryanair will save £2m a year by not having to repair broken reclining seats.

One of the surprises for me was how customer-focused Michael O’Leary is. Sure, there’s an impressive brashness there, but it’s clear he’s not obsessed with saving money regardless of the consequences, only where it makes sense. What’s staggering is the extent to which the airline industry can be restructured. Another eye-popping statistic he cites is that Ryanair flies about 9,500 passengers per employee per year, compared to around 600 per employee per year for one major national airline.

BUILD EXISTING PRODUCTS 

All of which got me thinking hard about my business, Crimson. We have various new product launches we’re planning or considering. But could we carry on just as well by not doing any of them, and focusing all that management time on building the existing products further? Previously, I’d thought that we were already maximising those areas, but now I’ve gone back and thought more about things. Echoing our innovation feature last issue, what could we do if we challenged certain elements we have thus far taken for granted as being immovable? A number of opportunities for improvement have already become clear and hopefully you as readers will see the benefit of that within a few issues. When you do, you can at least in part thank Michael O’Leary.

Interestingly, the strategy to focus rather than diversify seems likely to provide a company with a larger market share. And greater market leadership will almost always also lead to higher capital value. It’s a whole lot simpler too, with fewer sectors for senior management to keep on top of, and so on. And in today’s increasingly busy world, that makes my strategy for our next fiscal year very clear – focus on building existing products.

On the other hand, it’s hard to argue with Richard Branson’s success. As Michael O’Leary pointed out, Branson is roughly 10 times wealthier than him. Nonetheless, I know which strategy we’re following for the year ahead.

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