What Business Are You In?

Let’s admit it right away: This is a trick question. The correct answer is usually not the first answer.

Here’s a classic example from the annals of corporate America: Union Pacific thought they were in the business of railroads—the commonsense answer. In reality, they were in the business of mass transportation. Had they recognized this early enough, they might today be flying planes or building hybrid cars.

Here’s a more recent example. A client of ours supplying the upper end of the bicycle industry thought they were in the business of making brake mechanisms. Their special capacity was in lightweight solutions, and we resolved that they were in fact in the business of making racing bikes faster.

This realization led to a strategic expansion into gear systems. It took a process of careful self-examination to discover what now looks obvious but was not when we began.

So exactly what business are you in? Among all the mass of activity your company is engaged in, where is the beating heart? Step back, look at the big picture, and ask yourself: ‘‘What is our business really about?’’ The answer should be as short as you can make it:

  • ‘‘We are in the custom car auto parts business.’’
  • ‘‘We are in the investment advice business.’’
  • ‘‘We are in the residential community planning business.’’
  • ‘‘We are in the organic fertilizer business.’’

You may need to take several shots at this. There is a tendency to either be too granular (‘‘railroads’’ rather than ‘‘transportation’’) or too global (‘‘creating exceptional customer satisfaction’’). Remember that growth is your purpose. You need to define your business in a way that sets a trajectory broad enough for expansion and focused enough to stay on track.

So what business are you in? Don’t underestimate how powerful this apparently simple question can be. Your decision will almost certainly impact the trajectory of growth you choose.

What makes this so important is that in a world of rapid change and expanding global markets, you face an almost intolerable surfeit of opportunities. Without being anchored in a strong, unmistakable self-definition, you will be easily dragged this way and that.

*This post was adapted from David Braun’s Successful Acquisitions, available at Amazon.com

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