The Focus Paradox: Driving Growth and Creating Leverage through Differentiation

Turn focus into a strategic tool that slices through the uncessary to drive growth

"Strategy is about making choices; it's about deliberately choosing to be different." - Michael Porter

Differentiation is the result of making focused choices. In a world where it's crucial to stand out, the concept of "Differentiate or Die" has never been more relevant. Hermann Simon's research on high-growth Hidden Champions highlights a common theme: relentless focus. This focus allows these companies to create leverage, not only in pricing but also in customer preference.

Sadly, many entrepreneurs follow conventional paths, opting for similarity instead of unique differentiation.

The Challenge of Making Focused Choices

Entrepreneurs struggle with making focused choices for several reasons:

- Shortsightedness: Fear of limiting their opportunities in the long-term

- Depth: Lack of understanding about what creates value in their industry

- Risk-aversion: Preferring the certainty of conventional paths

- Change: Embracing focus requires making significant adjustments

These hard choices create a paradoxical situation because they involve making challenging decisions that may feel counterintuitive or even contradictory at first. To resolve this paradox, there are three essential focused choices entrepreneurs need to make to differentiate and create leverage:

1. Customer Focus:

   Not all customers are created equal.

   Determine your best customers by evaluating financials and relationships. This will likely result in narrowing down to 2-3 customer types. Understand these customers' attributes, growth aspirations, and prospects, then communicate this information to your sales and marketing teams.

2. Market Focus:

   Identify the markets in which you perform best financially and dynamically.

   
   Your best customers may not necessarily be in your best-performing markets. Focus on the products/services that make the most significant impact. This will reveal your strengths in delivering valued, profitable solutions to the market.

3. How-To Focus:

   Finally, concentrate on adding value.

   
   Adding value consists of activities that create the desired end product/service for the market. You don't need to do everything, but you should focus on providing value that ensures long-term customer loyalty. Whether it's customer service, turnaround time, or customization, make it concrete and excel at it.

In conclusion, focus conserves essential resources and guides businesses in a growth-oriented direction by emphasizing what works and has long-term potential. By narrowing down customer, market, and value-adding focus, businesses can differentiate themselves, creating leverage, impact, and ultimately achieving both profit and purpose.