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5
DOMINATEOR LEAVE
ÒUh-oh,Ó I thought, Òthis is not good.Ó
I was getting my first peek at the strategic plan of a chemical
products and services company whose financials had been flat for the
past four years. The company intended to enter just about every mar-
ket and niche imaginable. Business after business, region after
region, demographic after demographic, product line after product
lineÑall were targeted, with specific goals, action plans, and market-
ing initiatives. It looked terribly impressive, but I knew that this plan
would only aggravate the companyÕs problems.
To break from the pack, you must dominate some significant area
of the market. In advising military brass on how to win in warfare,
Colin Powell says, ÒChoose your battles very selectively, then go in
with overwhelming force.Ó Leaders of successful organizations,
whether military or corporate, know that the key to achieving victory
is to narrow their scope of activities, attention, and priorities to the
point that they can muster the critical mass they need to achieve true
market leadership.
In todayÕs Copycat Economy, you canÕt be great in many busi-
nesses, you canÕt be curious, cool and crazy in manybusinesses, and
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108 BREAK FROMTHE PACK
itÕs a foolÕs gambit even to try. You must choose your markets, your
products, and your customers very carefully, then go in with tremen-
dous creative and productive force until you dominate the arenas
youÕve selected. The implications are twofold: One, donÕt enter any
space youÕre not prepared to dominate. Two, once you figure out
what you will dominate, exit everything else. Period.
I could end the chapter right now, but I know that this principle
will strike many readers as so bizarre that we must start at the begin-
ning with some basic fundamentals. First, itÕs important to remember
that domination is not necessarily about being the biggest. Whopping
balance sheets, stout sales figures, fat market shares, and big newspa-
per headlines are no indication that a company has taken command of
its market, as executives of United Airlines, Kodak, and GM would
ruefully admit.
On the other hand, youÕve probably never heard of Moldflow. But
this small $65 million global purveyor of computer-aided design and
engineering software dominates in one critical manufacturing
process: the simulation of plastics injection molding. Its domination is
so impressive that over the past few years its real growth has ranged
from 30 to 50 percent annually and its profit growth has hit the dou-
ble-to-quadruple mark annually.
Neither is domination about beating up a rival. Does it really
matter if during this quarter FordÕs earnings are bigger than GMÕs,
or American AirlinesÕ income surpasses DeltaÕs? All four companies
are in deep trouble. In contrast, while Moldflow tracks the move-
ments of its rivals, it has no interest or expectation of demolishing
them. Instead, as marketing manager Peter Ruzinski explains, the
companyÕs primary goal is to Òbe anywhere injection molding is
done on earth.Ó
So if a company doesnÕt automatically dominate by outweighing the
competition, or by crushing it, then what are its benchmarks of suc-
cess? Commenting about Apple, the Wall Street JournalÕs technology
guru Walter Mossberg gives us some clues that point in the right direc-
tion: ÒThe MacÕs impact on the industry is vastly greater than its market
share. Apple is the most innovative major computer makerÉ Almost
everything it does is later copied by the Windows PC makersÉÓ
Ah, thereÕs the first clue. Dominant companies can be big or small,
but whatÕs important is that, like Apple and Moldflow, they have a mar-
ket impact that is greater than their size or the number of units they
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CHAPTER 5¥DOMINATEOR LEAVE 109
their industry. They demonstrate consistently visible forward momen-
tum, they are recognized for excellence in execution, and they often
have a reputation for cool. The ultimate indicators are their ultimate
results: Dominant companies are the most likely to generate consis-
tently impressive financial returns (especially profitability) and organic
growth rates. They also are a magnet for the best and brightest talent.
Apple has dominated the space of design and ÒhighÓ technology in
its computer products, even though the company is much smaller than
rivals like Dell and Sony. Over the past few years, Apple has carefully
applied this expertise to thoroughly dominate the world of online music
and portable MP3 audio and video players. This dominance has trans-
lated into extraordinary revenue and growth, as noted in Chapter 3, the
companyÕs revenue and profit growth has been extraordinary.
One more thing to keep in mind: Dominance is not limited to one
player. In the PC business, Apple might dominate design, but Dell
dominates manufacturing and distribution efficiencies. ThereÕs theo-
retically no limit to the number of dominant players in any industry,
as long as they choose different spaces to lead and those spaces mat-
ter to customers.
One Size DoesnÕt Fit All: The Peril
of Offering the All-Inclusive Menu
If thereÕs one phrase I would eliminate from corporate strategy ses-
sions, itÕs Òone-stop shopping.Ó This phrase is diabolical, for it can
make otherwise sensible executives salivate with infantile glee. Their
eyes glaze as they visualize hordes of customers spending gobs of
money and never leaving for another competitor because the company
magically provides them with an all-inclusive, integrated, A-to-Z menu
of products and services that they absolutely must have, forever.
This vision is a destructive fantasy that demolishes any possibility
of dominance. For one thing, customers will simply not comply with
it. As one of my clients told me, ÒJust because I keep a couple check-
ing and money market accounts for quick liquidity at Bank X, why
would Bank X assume that IÕll let them finance my home and manage
my retirement portfolio?Ó When Phil Condit headed Boeing, he
stated flatly, ÒWe donÕt buy engines, auxiliary power units, and avion-
ics on one purchase order, and we donÕt expect to in the future.ÓHarari_05.qxd 7/26/06 2:03 PM Page 110
110 BREAK FROMTHE PACK
Instead, the company continues to scan the global marketplace for
the suppliers that can provide the best price-value mix in each prod-
uct line, and then buys accordingly.
The pre-2005 AT&T learned this lesson the hard way prior to its
purchase by SBC. During its 1980s and 1990s debacles, AT&TÕs
strategic premise was that customers wanted to buy all their telecom
services (long distance, Internet, cable TV, web TV, cellular, and so on)
from one provider. Trying to make this all-things-to-all-customers
menu-building possible and scalable, AT&T binged on massive, debt-
ridden acquisitions.
Unfortunately for AT&T, those darn customers didnÕt cooperate
with the plan. Like intransigent children, individual customers
insisted on picking and choosing different services from different
providers, depending on where theyÕd get optimal value. Corporate
customers became increasingly wary of tying their fortunes solely to
one provider; they, too, chose AT&T for one or two things and found
better alternatives for the remainder elsewhere.
To challenge the famous Field of Dreamsdictum, if you keep on
building it, they probably wonÕt come. And then youÕre stuck with a
big stadium.
Apart from those darn customers who insist on making their own
decisions, thereÕs another reason why Òone-stop-shoppingÓ is a fantasy.
No matter what your consultants and investment bankers tell you, you
canÕt be great in everything, you canÕt do it all, and if you try to do it all
youÕll wind up with a big diversified menu of undistinguished Òme-
tooÓ products and services. Further, the wider the net you try to cast,
the more cumbersome, costly, and complicated your organization will
be, and the more your companyÕs resources, management attention,
1
creative capacity, and customer care will be spread thin.
Forget trying to be all things to all people. Resist the temptation
to acquire and diversify for the purpose of being in as many segments
and sectors of the marketplace as you can. These are losersÕ strategies
because companies that declare they intend to dominate everything
wind up dominating nothing. From 2000 to 2005, CEO Carly Fiorina
put HP into every conceivable sector of consumer-electronics prod-
ucts, high-technology products, and IT services, and to her last day
she insisted that the company would dominate them all. Yet after
years of acquisitions and every possible organizational gyration, HP
dominated only printers and imaging, the same arenas that the com-
pany ruled before Fiorina took over. Despite all the bravado and