Chapter 7

Sustaining growth


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Batesville Casket

Exxon Mobil

General Electric

Graphics Press

Hot Springs

Midwest Express



Pahlmeyer Wines



Union Carbide















excel At:

- Finding 
  market niches

- Defending  
  market position

- Creating 
  advantage that 
  is hard-to-

- Cost-control

- High quality

- Ongoing process 

- Evolutionary 












































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The two 
jobs of 

Create a 
market niche 

- carefully 
  observing trends

- bringing a 
  new technology 
  to an old 

- un-fragmenting
  an industry

- taking in 
  other's laundry 
  and contract 

- differentiation 
  based on price, 
  service, quality, 
  product range 
  or customization

Protect that niche by:

- avoiding 
  mass markets

- tolerating a 
  regulatory climate

- reinvesting 
  in their niche

- being the first 
  to innovate

- continual 

- avoiding 
  calling too 
  much attention 
  to themselves

- choosing 
 market segments





























- Range from 
  very large 
  to one person

- Strong central 

- Clear 
  between line 
  and staff

- Functional 

- Sharp 
  of labor

- Expert-

- Career paths 
  within functions

- Focused more 
  on today 
  than tomorrow

- Stand for 





























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The Specialist's

- Cautious and 

- Conscientious 
  and reliable

- Always on 

- Likes 

- Keeps cool, 

- Detail-

- Efficient

- At peace 
  with himself

- Has few 

- Prefers the 
  tangible over 
  the abstract

- Sometimes 

- Frequently 
  told to 
  loosen up

stumble when:

- Rapid change 
  their niches

- Straying from 
  what they do 

- Over relying 
  on top 
  for clues 
  about market 

- Paralyzed 
  by over-


- Restructuring 
  back to core 

- Watching for 

- Increasing 
  "share of 

- Re-segmenting 
  the market

- Withdrawing 
  from less 

- Avoiding the 
  commodity mind 

- Innovating

- Going global



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Chapter 7


Thrive through focus on niche markets

Excerpt from Go For Growth

By Robert M. Tomasko


"I'll personally break the neck of anyone who tries to veer us from the path we are on. We all know what business we are in. Love it...or leave it" Few Specialists are this direct with their employees, but most agree with the underlying sentiment: profits grow when everyone keeps to the straight and narrow.

The most heavily traveled path to growth is that of the Specialist. There are literally millions of these businesses throughout the world, ranging in size from multi-billion dollar global energy giants to one person software consultancies. Despite ubiquity, Specialists are frequently misunderstood, and their approach to growth often unfairly discounted. These misperceptions are not all that bad, at least for many established Specialists. Being misunderstood helps mask opportunities, and make it harder for competitors to discover what can be, for the right company in the right market, a great source of advantage.

Companies that grow by specializing have similarities to those on the three other paths. They also have some key differences. Specialists are:

- As innovative as Rule Breakers, without sharing these pioneer's high tolerance for risk taking

- Providers of customer service as flawless as any Game Players', but more attuned to competing with themselves than with others

- Holders of a competitive position in their particular market segment just as strong as that many Rule Makers control in the industries they dominate. Specialists might be called, only in half jest, Rule Makers run by engineers.

Where specialists thrive
Specialists can do exceptionally well when the world of tomorrow is highly likely to be similar to that of today. Or, in industries experiencing more turmoil, growth through specialization is appropriate when pockets of stability can be found among the chaos. Specialists search for the "eye of the hurricane."

Specialists are the kings of mature and aging industries, in markets that are sealable or niche able. These industries:

- Grow in pace with the economy as a whole,

- Display only moderate or limited potential for dramatic upheavals,

- Have companies with well established product lines,

- Host competition among a well defined group of businesses, with relatively stable market shares, and few new entrants,

- Serve customers with well defined needs and long established purchasing patterns, and

- Are driven by tried and trusted technologies.

Financially, businesses in these industries have high returns on their assets, decreasing needs for working capital, increasing cash flows, and diminishing unit costs for goods sold - or, in other words, a very favorable economic position!

Cash cows or long distance runners?
Specialists, especially successful Specialists, have frequently been labeled "cash cows." This may sound apt, considering their strong financial position, but it is also dangerous and misleading.

For many years the conventional wisdom of what to do when an industry matures was to "cut and run." Manage the business to generate a lot of cash, use these proceeds to diversify into a different industry with greater growth prospects, and then eventually divest the tired "cow" when its milk starts to run thin.

This is good advice for others to follow.

Specialists often do very well in situations where competition follows a path of slow-motion liquidation. There is often a lot of money to be made in markets that others are exiting. Earning it requires an ability to dig-in and tough-out the temporary glut of competitors. Some companies lack this perseverance (out-of-place Game Players, for example). These non-Specialists are prone to do what they do best - fighting pitched battles for market-share. This makes sense in rapidly growing markets; in more mature industries it is likely to lead to fatal, profit-less price wars that only accelerate the departure of the those not totally committed to the particular business. Mature markets require a mature, disciplined mind set.

Hard-to-imitate advantage
Specialists are companies with a very unique talent. They know how to seal off a portion of a market from other competitors. Specialists define and protect their segment by providing high value, customer-pleasing benefits, usually including one or more of these:

- lowest prices

- highest service

- best quality

- broadest array of products and features

- most customized service or product.

Most Specialists choose one of these as their key point of differentiation, and then position their business to deliver it. At the time the microcomputer chip market emerged, in the early 1970s, Texas Instruments was a sales leader because of its remarkable ability to race down the production cost curve faster than any competitor. This allowed TI to offer the lowest prices and gain the greatest market share with the raw material that fueled the personal computer revolution. During the same period, in another segment of the same industry, Digital Equipment Corporation used a different product attribute, quality, to win control - for a time - over the burgeoning minicomputer market.

Islands of calm
Within their market segment, Specialists are able to create a zone of relative calm by controlling the pace of technology development and keeping competition at arms length. The best Specialists preempt direct competition by choosing market segments that are relatively unattractive to others. Indiana's Batesville Casket Company excels at this . It created an initial strong position by introducing mass production to an industry once dominated by small artisans. The ongoing job of maintain a leadership position in this business is facilitated by ongoing drops in the U.S. mortality rate and increases in cremations - statistics certain to frighten off any potential new entrant. Meanwhile, Batesville grows profit margins by judicious application of just-in-time delivery, flexible manufacturing, and maintain its reputation for high quality "fit and finish" by hiring skilled metal engineers laid off from the nearby downsizing auto industry.

Getting rich slowly
Specialists are willing to sacrifice product line breadth for stability and, when necessary, revenue growth for regular earnings increases. They believe in a "get rich slowly" philosophy. They first create a position of advantage through focus. Then they avoid squandering the advantage by constantly improving their product and the processes they use to make it. These improvements, in turn, allow Specialists to aggressively maintain their prominence in their industry segment, and make it harder for competitors to dislodge them - a nice way to grow a business. If, however, they fail to invest and reinvest in their segments, Specialists can easily become opportunity markers for more aggressive, growth-minded companies.

Specialists form the economic bed rocks of Germany's mittelstand and Japan's large network of suppliers and subcontractors, two of the world's strongest exporters. In smaller countries, Specialists provide a global reach for select industries such as: Finland (cellular telephones), Italy (ceramic tiles), and Switzerland (luxury watches and banking).

As with all growth strategies, there are dangers in excess. Too much focus, and too much of the "looking inside" orientation that frequently accompanies it, can lead to stagnation and eventual decline. While some well managed Specialists have long stretches of unbroken growth, it is as hard to surround a market forever as it is to perpetually dominate it by controlling industry standards. Specialists, like all growth companies, require periodic course corrections.

Specialists are everywhere
It is almost impossible to imagine a market that does not include some Specialists. The identities of the leading Specialists, though, are usually well known only by those wanting to purchase their products. To other consumers, they are invisible.

- For industrial-strength door locks, the super-specialist is a company aptly called Best .

- More portable home spas are purchased from the Hot Springs Division of Watkins Manufacturing Co. than from any hot tub maker.

- After a session in your spa, dry off in a hammock made in South Carolina by the Pawley Island Rope Hammock Company.

- The fastest growing natural food specialist is Whole Foods, operator of supermarkets selling only organically farmed, preservative-free products.

- Medical product companies are increasingly following a hunkering down strategy for growth: getting more people to use their existing products. The makers of drugs to treat high blood pressure know that only a third of the Americans with this problem are using their products, and only 15% of people with high cholesterol take the medications available to reduce it. These statistics represent great market opportunities for companies like Bristol-Myers Squibb and Pfizer, provided they focus their resources around treating existing diseases, leaving the more glamorous Rule Breaking discovery of new, blockbuster products to others.

Game Players grow by increasing their market share. Specialists can grow by increasing the size of the market they serve.

Look for sardines, not whales
Concentrating resources on marketing is a specialization tactic a number of smaller, high growth drug companies have used with great success. Medeva Plc., a decade-old British pharmaceutical firm, prides itself on spending zero on basic research. Instead it buys smaller drug companies and slow-selling medicines and vaccines from the global giants of its industry. It even acquired its chairman, Bernard Taylor, from a major league drug maker, Glaxo, where he was once chief executive. Over the past several years Medeva's sales have doubled by concentrating on acquiring products that treat a narrow range of conditions, like influenza and asthma. This also allows its sales force to focus on visits to doctors who specialize in these ailments, making them more productive than salespeople promoting a broader range of products.

Another small drug Specialist, Forest Laboratories of New York City, takes a similar approach. Its sales force is among the highest paid in the industry as well as the most efficient. Every salesperson is eligible for stock options. Forest has a knack for taking outcast products from larger companies - drugs that never received significant attention - and turning them into strong sellers. This strategy is driven by a realization that there are many more $50 million revenue dollar unique drugs available than billion dollar ones, or as Forest's president puts it: "There have always been far more sardines than whales."

Thrive among the giants
Specialization can be an effective way to survive, and prosper, in industries dominated by Game Playing giants. Midwest Express, a business class-style airline that serves 23 cities from its hub in Milwaukee, has earned profits each year in a business littered with bankruptcy filings from less focused new entrants. Most of Midwest's failed look-alikes, UltraAir, Air One and Air Atlanta set up their operations in the shadow of a major airline's hub - places the majors fight to the teeth to defend. Midwest chose, instead, to go where other's were not, Milwaukee.

Midwest is also very aware its advantage lies in distinctive customer service - it was the first air carrier to bake chocolate chip cookies in flight. It carefully stays away from markets where frequency of flights is critical, and has avoided most of the ruinous fare wars that have crippled so many upstart carriers. "Know yourself' is the first rule of successful Specialists.

The Dutch airline, KLM, has reinvigorated its profit growth with a different form of specialization. It is the airline to use if you own a horse and need to travel globally. Every year KLM transports thousands of of world's top breeding and racing horses in self contained stalls - kept in KLM's 747 cargo compartments, of course. Charging up to $9000 for a transatlantic crossing, amenities include an animal steward who keeps the horses calm during takeoffs and landings, and an equestrian hotel at KLM's Schipol hub to help them recover from jet lag.

Go where the growth is hottest
At their best, Specialists excel at finding growing segments even when the overall industry is contracting. This is a hunt that requires vision more intensive than expansive. Beer drinking may be slacking, but business for micro brewers like Anchor Steam Beer and Sam Adams has never been stronger. The mass market for wine in the U.S. has slowed as consumers are drinking Calistoga Water instead of California chardonnay, but Jason Pahlmeyer still complains about his phone ringing off the hook with calls from people wanting his speciality premium wines. He is the producer of the Napa Valley chardonnay ('91 Pahlmeyer) that actress Demi Moore offered to Michael Douglas in the movie Disclosure . The wine's rarity, only 400 cases of that vintage were made, plays a key part in the film's plot. It is also key to Pahlmeyer's business strategy.

Pahlmeyer is an example of how the Specialist trend is changing the face of American wine making. He does not own a vineyard or a winery. Pahlmeyer's only capital investment is the barrels in which the wine is aged before bottling. Investors own the land on which his wine's grapes are grown, and he contracts with a "custom crush" company, the Napa Wine Company, to make, age, store and bottle the product.

Pahlmeyer concentrates on the formulating and marketing of his chardonnays and cabernets. Napa Wine, and its competitors such as the Associated Vintage Group, handle the capital intensive, expensive production details for him and many other California wine boutiques. These "wineries without labels" are able to spread the high fixed costs of wine making over a much higher volume than any small boutique could.

Some larger wineries also stay focused by having others handle the production. The Codera Wine Group's business emphasis is on building the identities of its medium-priced brands, and on efficiently managing their sales and distribution. With the help of the Associated Vintage Group it is able to sell over 200,000 wine cases a year with only eight employees - true bloat less growth!

Ride the outsourcing wave
Outsourcing is far more widespread, of course, than the wine business. In many industries, the large successful firms are pulling back to emphasize their core competences, creating seemingly unending variety of niches for smaller suppliers. An unwanted side dish for an industry giant may be a healthy main course for a focused Specialist.

An even more radical change is the increasing willingness of many companies to subcontract - as in the wine industry - the complete manufacture of products they still put their own name on. Examples of this trend are everywhere:

- Apple's Power PC's are fully assembled and packed in a box with Apple's logo on it by the Solectron company; Apple's first notebook computers were made by Sony,

- Heilman Brewery makes Arizona Iced Tea,

- Coosa Baking produces General Mills' granola bars,

- Many Asian car makers build General motors Geo line, and

- Most of Sam Adams Boston Lager is brewed in Pennsylvania by Pittsburgh Brewing.

Specialists that concentrate on providing outsourcing or contract production are in the most rapidly growing segment of that path to growth. Both manufacturers and service-providers, these Specialists have found a new way to add value: freeing customers to specialize on the talents that will add the most value to their customers.

Car manufacturing used to involve putting iron and coal into one end of a plant and watching for a car to come out the other end. Now industry profit-per-vehicle-leaders like Chrysler rely on Specialists like the Lear Seating corporation to do make what it once produced for itself. When BMW decided to produce a two seat convertible roadster in the U.S. is carefully sorted out what components of the car provide the "unique BMW experience": the power train, suspension and the cockpit. Everything else in the new luxury cars is made by Specialists such as Spartenburg Steel (metal body stampings), ASC (roof tops), and Hayes Wheel (the aluminum alloy wheels).

Hallmarks of the Specialist
More than most types of growth companies, there is great diversity among Specialists. By their nature, each is sui generis , in a class by itself. But there are characteristics many on this path to growth share. Here are some of the most common:

1. Process improvement leaders
Specialists are frequently the kings of process improvement innovation - keeping on top of the latest ways to produce their products or services. They have been the earliest adopters of quality circles, zero defects programs, and business process redesign. These techniques have value in almost all companies - but their relative payoff in businesses growing through specialization is usually much greater. Process improvements directly lead to greater quality or lower costs, the two strongest drivers of a Specialist's competitive advantage.

Ironically, despite the vital importance of ongoing innovation, too many Specialists fail to take full advantage of the techniques available. Instead they devote most of their attention to keeping their production processes stable. Specialists just seem to innately prefer fine-tuning to radical change: "I'm making so much money doing things this way, why should I be bothered changing?" Specialists expend great energy in building buffers between their well-oiled operation and the outside world. They look hard for stable sources of supply, give great attention to managing inventory, and prefer steady demand for their products over higher, but less predictable sales. Specialists are very tempted by vertical integration, owning as many of their suppliers and distributors as they can. Unfortunately the hidden cost of this quest for stability is often diminished attention to the real value they provide for their customers, their particular hard-to-imitate advantage.

2. Centralizers of control
Specialists are bastions of strong, centralized management control: "Do things my way, or not at all," is often the message from the top. A small top management group often makes most of the key decisions. The controller or head of production usually have more sway over decision making than do the executives in charge of marketing or new product development.

Specialists are most likely to have the clearest separations between line and staff roles, the doers and the thinkers. "I set the course, you execute it" is standard operating procedure. They tend to manage expertise by first compartmentalizing, then delegating it. The approach they take to growth in their outside market - specialization - is also tightly reflected in how they manage themselves internally.

Unlike the cross-functional job hopping common in Game Players and Rule Makers, successful careers in Specialists often involve holding a sequence of jobs entirely within one functional speciality. "Don't take a particular job at a specialist unless you are 100% sure you like it - because your reward for doing well will be more of the same," is apt career advice fro many Specialist employees. Sales people tend to stay sales people, engineers work in engineering, and human resource specialists confine their career to the personnel department.

3. Functionally organized
The organization structure of a Specialist is designed to provide control through stability. It is almost invariably a functional structure, characterized by a sharp division of labor. Compare this with the typical structures of other growth companies:

- Game Players are usually able to achieve fast market penetration by organizing employees primarily around customers or geography,

- Rule Makers tend to structure around entire markets, and

- Rule Breakers' structures tend to reflect the individual idiosyncrasies of their visionary leaders.

4. Job titles mean something here
An employee's rank, or level in the hierarchy, usually means more in Specialists than in companies on other growth paths. A sense of working in a quasi-government bureaucracy may set in, with employees frequently referring to themselves and other by their salary grade: "I'm a 22, he's only an 18, why should I bother listening to him?"

The structures and personnel systems of Specialists often get in the way of adopting participative management practices. Strong functional walls and tall hierarchies limit the effectiveness of reengineering and other forms of process redesign. When Specialist employees are assigned to cross-functional task forces they commonly follow the unwritten rule: make no changes that will diminish the role and power of the department in which they are based.

5. Watch every bloody detail
There is an upside to Specialist's functional organizations, though. It is a benefit that should not be totally ignored in the wave of current frenzy to reengineer operations and obliterate old ways of doing things. Specialists are native-born cost controllers. This is reflected in the industrial grade carpeting, metal desk tops and cinder block walls often visible in many of their headquarters offices. It is reflected in their ability to manufacture products more cheaply than companies on other growth paths. They do this by what Harvard Business School researcher Richard Hamermesh observes as intense attention to every bloody detail.

The Specialist's functional orientation allows them to excel at tasks involving detailed analysis, like operational planning. A Specialist will always carefully aim before firing. They may not be best at spotting a new market trend or unresolved customer problem, but when an opportunity is put in front of them they are very likely to find a good solution. When a Specialist is in a business, it is fully engaged in that business.

6. Know who fits in
Specialists also tend to have better ideas than most about who will fit into their particular company. Stephen Ardia does not waste his time recruiting at Harvard Business School. He is chief executive of Goulds Pumps Inc. - an industrial and commercial pump maker in Seneca Falls, New York. He wants people who know pumps. Model railroad builder Kato, in Tokyo, wants train-crazy new recruits, and Germany's Silberstrand prefers hi fi-fanatics.

Some Specialists are very aware of the insularity problems that functional organizations produce. Worthington Industries, a Columbus, Ohio steel-processor goes out of its way to hire former football players, people who have already proven an ability to be team players. For Worthington this approach is a lot simpler than expensive selection consultants and teamwork training. The company seems to be on the right track, though for diversity sake, they might want to consider some other ways people exhibit collaborative abilities.

7. Pay for stability and performance
For some Specialists, higher -than-average wages are an important part of the business strategy. This may seem odd in such cost-conscious companies, but many justify the higher pay scales by the benefits they receive from a more stable work force: low turnover-related costs, ease in conserving a proprietary knowledge base, and less labor strife. The best specialists also make liberal use of incentive pay, both to reward high customer service and to encourage everyone to wring-out operational costs.

In general Specialists' pay practices heavily rely on profit- or productivity gain-sharing, while Rule Breakers will, for example, use stock options to focus attention on the company's future performance. Game Players are more likely to incentivize revenue increases and market share gains, while Rule Makers often encourage development of the next generation of products with their bonus and stock plans.

When Specialists set performance targets, the orientation is frequently to beat themselves, to do better next year than they did last. This "rear view mirror" type of appraisal is fine to encourage continuous improvement, but it can create blind spots by not paying enough attention to what competitors are doing. It can also reinforce dangerous tendencies toward smugness, a problem shared with some Rule Makers, and - compared to Game Players - Specialists are chronic under users of benchmarking.

The Specialist personna
Examine the inner workings of a Specialist more closely. If a Specialist company was an individual, rather than a company, what would be the character of that person? How would that person describe himself or herself?

Such an individual would probably say something along these lines:

"I'm a person who is cautious and prudent, maybe a little slow in making up my mind.
People tell me I'm conscientious and reliable, which is music to my ears. I like to trace my lineage directly back to yesterday's family farmers, craftsmen or master artisans. I've never lost my work ethic.

"I usually keep my cool, restrain my emotionsand stay on an even keel.

"I'm detail-oriented, sometimes even called a perfectionist. I am efficient andwell organized - and really bothered by people who aren't. I arrive for appointments on time, I get projects finished. Why can't everybody else? Deadlines are commitments carved in stone - never starting points for a negotiation, the way some people like to treat them.

"I am usually more comfortable with things I can get my hands on than with abstract intellectual concepts. I attended an engineering school, and never had much patience with liberal arts-types.

"I'm fairly conservative, and never have problems thriving in a defined structure. I go along with what the psychologist Erich Fromm once said about freedom. True freedom, according to him, is not the total absence of structure. Letting people go off and do whatever they wish seldom accomplishes much. Instead, most people, Fromm believes, prefer a clear structure, one that allows them to work within defined boundaries in autonomous and creative ways. Me too.

Intrinsically motivated
"I'm happy to pursue creativity and technical excellence for its own sake. I get turned on by problems that need to be solved, challenges that need to be met. I'd rather prefer to receive recognition for climbing a high mountain than for developing a new theory.

"I want to do work I like, even if it means taking a pay cut now and then. I get alot of satisfaction from putting something together and seeing it work.

"Maybe my range of interests are a little narrow, but they run very deep. I want to know everything there is to know about the things that most interest me.

"I bet I'm more at peace with myself than most people. I seldom brood over existential questions. Why bother, they never have a clear answer, anyway. I'm not a person plagued with deep doubts, my sense of confidence comes from my ability to get things done."

Specialists are usually content to work within a paradigm, unlike Rule Breakers who seem happy only when defying established conventions. They are lower-keyed than most Game Players, and less domineering than Rule Makers.

Blind sides
Some Specialists pay a price for living such a stable and focused life. At their worst they may be obstinate or dogmatic: "Don't distract me, my mind's already made up," seems to be the message they project. Specialists may have a fairly limited degree of sensitivity, finding it difficult to reach out to others with different ways of doing things.

A weakly developed antenna for other's feelings may limit the Specialist's ability to sell himself or his ideas. Some make better senior individual contributors or high level troubleshooters, than supervisors or managers.

Many Specialists give the impression of always intensely concentrating. For some Specialists, this can be a problem solving strength, but it can also lead to missing out on more subjective experiences, the ones only noticed when in a more receptive mode. Specialists can easily miss nuance. Unlike Rule Breakers and Game Players, Specialists seldom respond to emotional appeals. It may even be hard for some Specialists to experience feelings of deep conviction - they respond better to calls to their sense of cold logic. They are glad to do something, as long as it all adds up.

Threats to future growth
While mature markets favor lost distance runners, the industrial equivalents of earthquakes and volcanic eruptions (i.e., Bill Gates deciding to enter your business) require more the abilities of the sprinter. Unlike human life cycles, industries can evolve in reverse. Today's mature and settled market may be tomorrow's fast paced growth industry. When sea changes occur, old niches and long standing market segments collapse like sand castles. Specialists in this situation risk rapid extinction if they gamble on the continued viability of what worked in the past.

Until recently, Ginns was the company to go to for office supplies in Washington, D.C. In a city fueled on yellow legal pads and Bic ballpoints, there was a Ginns store in sight of almost every office building. Ginns only competition was another, look-alike Specialist, Jacobs Gardner. But in the past several years office super stores - Staples and Office Depot - arrived into this market, with warehouse-sized variety and deeply-discounted prices. Last year Ginns closed its last retail store , and joined Jacobs Gardner in a new specialization, selling stationary under long term contracts and office supplies by mail-order. Ginns and Jacobs Gardner were lucky. Most of their peers have either closed completely or been merged out of existence.

1. Functional myopia
Why do so many Specialists succumb to rapid change? Ironically, the same functional organization that keeps them focused on costs and quality limits their ability to notice and adapt to rapidly changing business conditions.

Specialists tend to over-rely on the person at the top of their hierarchy for early warnings about major change. Specialists frequently have little choice because this is often the only job in the company that integrates the views of the senior functional managers (production, sales, finance, etc.) into the "big picture." Often the detailed work of coordinating and integrating leaves little time for focusing on what is happening outside the organization - changes that may reshape the industry in which the Specialists operates.

Specialists notice change the way the proverbial blind men observe the elephant - each sees only a part of the whole through his "functional blinders." Functional organizations, and the hierarchies needed to coordinate them tend require information to pass through many people before it is acted on. This, and a paucity of windows to the outside world, can make a business dangerously myopic.

2. Asking the wrong questions
The sense of stability many Specialists work hard to cultivate is also dangerous. It can lead to taking too many things for granted for too long. As analysis of a Specialist's board or management committee meeting minutes will most likely show that questions related to "doing things the right way" are asked much more frequently than those pertaining to "doing the right things." Too strong an emphasis on efficiency drives out considerations of effectiveness.

3. Plans masquerading as strategy
Missing the forest for the trees is easy for a Specialist - it seems to come with the territory. Its field of vision is just like that of a high powered electron microscope -very narrow. Fine-grained details are observed closely, broad basic changes disappear into the background and are missed. Developments occurring outside the Specialist's particular niche may be completely ignored or discounted.

Strategic planning is supposed to cure this kind of narrowness, but what many Specialists proudly call their "strategic plans" are primarily agglomerations of unrelated details. One Specialist executive proudly showed me a three volume planning document. He obviously felt so much information was gathered that the company must be safely on top of the situation. Upon further inspection, the plan consisted of stapled-together collections of individual departmental plans, with minimal examination of the real key issues that cross-cut the company. These were really plans for sales, or plans for manufacturing, not a vision of what the business-as-a-whole must become. These multiple volumes were primarily a source of dangerous false comfort.

Some Specialists succumb to management-by-autopilot, allowing the planning process itself has become a paper-shuffling ritual. All the forms are properly filled-out, but little effort given to obtaining new insight about customers or markets dynamics. After the founders of Polaroid and the Walt Disney Company died, both firms drifted from the Rule Breaking to the Specializing orientation. Instead of applying fresh creative approach to planning their futures, managers in both responded to business challenges by asking "What would Walt [or Ed] do now?" Good strategy seldom flows from exegesis.

4. Management-by-imperialist
Specialists are also susceptible to a problem much more serious than excessive ritualism: executives who believe that absolute control is the only answer to the challenges facing the company. These individuals fear loosing their position of power more than threats in the marketplace, so they dominate - or attempt to dominate - all aspects of the company's operation. They insist employees completely submit to their ways. Relationships among managers and subordinates are characterized more by dominance and submission, not colleaguality and mutual respect. These situations become poisonous quickly. The strong human ties that often bridge the gaps caused by a Specialist's functional organization become almost impossible to maintain, and civil war among departmental fiefdoms becomes rampant.

A. Robert Abboud, once chairman of First Chicago Corporation, ran the bank that way. A competing banker characterized Abboud's attempts to run everything, and know what everyone is doing all the time, as more appropriate for a branch manager than chief executive. This style was effective during Abboud's initial years at First Chicago when he turned around a serious financial loss situation. But as the bank matured, Abboud did not, and over 100 officers resigned before Abboud finally left. This situation is too common in U.S. business. World War I fighter ace Eddie Rickenbacker later led Eastern Airlines and started its long slide to decline with similar behavior. Similarly, Henry Ford's drive for absolute control almost destroyed the automaker he created.

Sustaining growth
Sustaining the growth of a company on the Specialist's path is not easy. Excessive control and functional myopia must be avoided, and the "cash cow" mentality must be abandoned.

The road to recovery for a Specialist that strays from the growth path can be a long one. The core capability of Specialists is knowing how to focus on a particular market segment and seal it off from others by providing customers with a hard-to-replicate advantage. When Specialists move into markets that require other competences, their performance is likely to diminish (unless they also transform their capabilities, organization and people to fit the new situation). This is what happened to Goodyear Tire & Rubber, Owens-Corning and Union Carbide. They all blurred their focus.

The critical role of top leadership
Specialists, by their nature, are companies driven from the top. A lot of the credit for Union Carbide's strong return to profitability and growth belongs to its chief executive since 1986 Robert Kennedy. A lifelong Carbide employee, Kennedy had enough appreciation for and confidence in the Specialist's underlying strengths to turn the company almost upside down to restore these capabilities to prominence. Growth-oriented managers in Specialists have two hard-to-combine skills:

- insisting that things be done right , this is the Specialist's stock-in-trade, keeping the craftmenship-ethic alive; and

- keeping alert for new things to do, new sources of growth rooted in the Specialist's particular core skills.

At Union Carbide Robert Kennedy's approach to the second skill involves encouraging researchers to apply their proprietary process technology to produce products priced higher than the mundane commodity chemicals Carbide is so good at making cheaply. Synthetic rubber, used to make window frames and auto parts, is one of these possibilities. These new products may take Carbide toward markets where Specialists do not belong, but Kennedy's memories of its recent painful restructuring should provide navigational lessons to find the right new niches.

Options for renewed growth
There are a wide range of growth strategies available to Specialists:

Go for share of customer. Leave pursuit of market share increases to Game Players. Instead find growth through increasing "share of customer." Look for logical ways well established relations with existing customers can provide conduits to sell them other things you have credibility providing. Crown Cork & Seal specializes in bottle tops and metal cans. It recently purchased the largest U.S. maker of plastic bottles. Noting that the same customers who buy metal cans also purchase plastic containers, Crown quickly put plastic -making machinery from its acquisition into its existing plants, and now efficiently makes and sells a full range to each customer.

Let the customer find new uses for your products . Kellogg originally was a health food company, making breakfast cereals for people with digestive ailments. The product soon caught on, and became a mass market item. Some markets come full circle, though, if you wait long enough. Contemporary concerns about fiber and nutrition are bring Kellogg back to its health speciality roots. 3M is another company that grew from a lackluster maker of industrial abrasives to a consumer giant by fusing a Rule Breaker's sense of creativity with a Specialists' focus on a handful of technologies it knows inside and out.

Segment out of commodity markets . The key to growth in a mature market, or survival in a rapidly growing one, is segmentation. Let others turn products into commodities, stay alert for the most profitable pieces of the industry. The American message paging business is a battlefield in which a dozen Game Players compete, primarily on price. In the midst of this chaos, Skytel plays the game in a more focused manner and is able to charge customers a third more than its main competitors. Skytel concentrates on the business paging market, and has grown to be the dominant nationwide beeping service. It continually innovates to protect its niche, creating a cross-country two-way wireless network for e-mail, and offering pagers that display over 200 alphanumeric characters.

Don't get into the commodity mind set! You will only relegate yourself to the low end of your business.

Innovate! Innovate! Innovate! Innovation is key to the survival of most Specialists, even those operating in industries long on tradition, but short on fresh thinking. Several years ago American President Line was an endangered species, a high labor cost shipping company struggling in an industry of cheap foreign competitors. Rather than shut down, APL innovated. Knowing it could never ship goods from Asia, through the Panama Canal, to the East Coast as inexpensively as its competitors, it decided to create a land-bridge from Asia. Its ships carrying New York-bound goods end their journey in Oakland, California. Then the containers they are carrying are put on an APL-specially designed, double-stack container train which speeds them to New York. This service is two weeks faster than port-to-port competitors, which allows APL to attract higher value, higher margin cargo.

All innovations create problems; APL's was no exception. Most of its traffic went one-way: from the Orient to the East Coast. But the special rail cars it used had to be returned to California for more containers. Rather than send them empty, producing no revenues, APL managers took off their seafaring blinders and learned than most domestic U.S. cargo moves - a lucky coincidence - east to west. Soon deals were made with United Parcel and the U.S. Postal Service to fill the empties, and APL's margins received another healthy boost.

Become the global specialist. Nokia used to be a small Finnish company that sold a little of everything - from television tubes to toilet paper. While this range made sense for a company serving a small Nordic economy, it did not fit the global aspirations of Jorma Ollila, its chief executive since 1992. In true Specialist style, he sold-off most of Nokia's product lines and concentrated on developing the mobile telephone technology it had once pioneered. Ollile knew this focus would require selling in markets beyond Scandinavia, so he pulled all the stops and focused all his engineering talent on producing cheaply the latest technologies. This single minded focus allowed Nokia to steal the technology lead in cellular phones from Motorola, and become the number two company in this high growth industry.

Broaden the field of vision
Capitalizing on growth options such as these is heavily dependent on Specialist managers with a willingness to broaden their field of vision while keeping their core strengths. They have to actively resist the natural tendency not to want to be distracted from the straight and narrow.

These are some steps growth-minded Specialists can take to stay attuned to future opportunities:

- Expand the number of employees with broad, multi-functional jobs. Organize in ways that pull together functional teams around specific customer groups below the chief executive and senior management levels.

- Seed the business with senior individual contributors responsible for the "white space" on the organization chart - the promising markets, technologies and customer needs not currently the responsibility of an established organization unit.

- Encourage widespread involvement in industry and professional associations. Make sure that functional specialists actively use the industry associations to broaden their personal perspective. Then use the information obtained to actively challenge the company's conventional wisdom.

- Organize cross-departmental/cross-organizational level networks throughout the company to generate the strategic plan. This is too important a process to delegate to planning specialists. Consider ways to actively involve suppliers and customers in preparing the plan.

- Incentivize employees on company-wide, not solely departmental, performance.

- Use tools such as 360-degree evaluations of individual performance (appraisals in which employees are rated not just by those above them, but by peers and subordinates as well) to lower the walls around functions and levels. Be willing to retrain or remove strong performers who will not support others or play as part of the team. Their debilitating effect on the organization overall will outweigh the benefits of their individual talent.

A fifth path to growth
Matching a situation with its appropriate strategy, and the right kind of people needed to carry it out is the first step to growth. There are many paths a business can take to successfully grow. Mastery of one, however, does not imply success on the others.

Some paths are mutually exclusive. Rule Breaking would be counterproductive, bull-in-a-china-shop-behavior in a Specialist's natural market. Few Game Players successfully unseat a reigning Rule Maker, although some Rule Breakers have.

Successful Specialists hate to feel they are at the mercy of events in their marketplace. They will work overtime, if necessary, to control everything effecting them. Specialists do well in situations stable enough to allow such behavior - but not all growth situations are amenable to focus and defense. Some markets are so volatile, some rules of the game so up in the air, that the only way to move forward is by giving in. These chaotic industries are the most challenging to grow in. They are the realm of the Improviser.


© Robert M. Tomasko 2002

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