One time or another, every firm struggles with the answer to this deceitfully basic question: what business are we in? Those that are successful at figuring out the answer continue to evolve, the rest become extinct.

What business are we in is an important question as it guides an organization at ever facet of its decision making: who its customer is, what needs it meets, what benefits it provides, how it’s organized, how its organizational culture formed and what competencies it develops to deliver this value. Fundamentally, it orchestrates how the value is created and delivered, for the firm, its customers, employees and shareholders.

Knowing what business you are in, and more importantly not in, helps the firm focus on what to pay attention to, what to ignore and what to learn: customers, markets, competencies, technologies, trends… Ultimately, this all contributes to the firm’s profitability, its top line and/or bottom line growth.

It is also important to note that the industry, market and customer dynamics are constantly evolving and changing. Being aware of those changes is crucial for a firm’s ability to evolve, and to refine the answer to the question: what business are we in. At the same time, our thought models, our day to day context constrains and limits our thinking. Therefore, building awareness of the complex environment we operate in, and becoming mindful is a key to survival of the firm. Scenario planning, forecasting techniques and SWOT analysis are tools that can help break the boxed thinking and force us to look beyond what is obvious. The challenge for managers is how to design these agile organizations that can evolve and respond to the changing needs.

Railroads are a classic example from the pages of history books. Once the growth engines for the country, now mostly extinct. The ones that survived, like Union Pacific, redefined their business as transportation and not just railroads. Henry Ford introduced the concept of mass production to automobile industry: you can have any color, so long as its black. But, it was GM that recognized the changing trends in the customer desires and realized that semi-customized designs could be delivered at minimal cost to the customer: a car for every purse and purpose.

What started as a test and measurement business in the late 1930s for Hewlett Packard, became computing and peripherals in the 1990s, and today is moving “to integrate content across the home, whether it’s emanating from the Web, from satellites, from cable, or the PC, and bring that to the consumer’s touch.” (The Wall Street Journal, The Weekend Interview with Mark Hurd The Un-Carly by Michael S. Malone, April 14-15, 2007)

Amazon is not in the business of selling books or groceries for that matter. For Amazon to be successful, to be profitable, they built the needed competencies for logistics, warehousing, distribution and fulfillment: the shipping business. Starbucks is not a service provider, they are all about experience. Experience that brings us the “third place” beyond home or work, a place that has a feel of a friendly sidewalk cafe in Europe, and a place where you can order a double tall not fat extra dry cappuccino with a dense, caramel-like sweetness and smooth, satisfying finish consistently every time.

I mentioned that we recently visited LegoLand. Take a look at these shots I captured; what business do you think they are in: annual subscription? Park hours were 10am-6pm during our visit. On a positive note, with so many interesting things to look at, we were able to avoid most of the rides. Our son, like a kid in a candy store, was quite happy with just being there, and enjoyed every minute of the visit.

So, what business are you in?

Technorati Tags: what business are you in

Related Posts:

Trackback URI | Comments RSS