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 / Spring 2005 / Issue 38(originally published by Booz & Company)


The Core’s Competence

Business focus is the basis for all investments and the criterion for all plans and budgets. The focus determines what capabilities a company will develop and where and how it will grow. The focus must be clear, because it tells everyone what the company will do — and what it will not do.

Business focus cannot be decreed; rather, it must be premised on the firm’s existing — and ideally its historical — strengths. This is because the company must be able to establish, for its own people as well as its present and future customers, a clear “right” to win. Research (by Jim Collins, among many others) has shown repeatedly that those who stick to a consistent strategy outperform their peers over the long term.

Focus need not have anything specific to do with the product portfolio. Clorox focuses on bringing big-company capabilities to niche categories. It can win in bleach and in specialized laundry products, such as stain removers — but not in laundry detergent, so it doesn’t go there. This explicit business focus tells Clorox managers which initiatives fit and which are inconsistent with the strategy. Acquisitions that would bring Clorox into big categories do not fit. But acquisitions that allow Clorox to transfer its large-firm capabilities to small categories do, hence its successful acquisitions of Kingsford Charcoal and Glad bags. In small ponds, Clorox can be the big fish.

Focus adds coherence to a product portfolio — and coherence is a clearly developing best practice among CPG leaders. Heinz sharpened its focus on condiments with its 2002 sale to Del Monte of seafood, pet food, private-label soup, and infant food brands. Procter & Gamble has a clear focus on technology and a portfolio aligned with categories in which technology makes a difference. When its experience with the Olestra fat substitute made it clear that technological innovation had a limited future in the food business, P&G disposed of its beverage and snack businesses. The company even sold off Crisco, a big-name shortening and food oil brand it had introduced in 1911 and advertised ever since.

Business focus naturally implies a consistent approach to capabilities development and planning. Although any executive would want his or her firm to be world-class in R&D, supply chain management, marketing, IT, customer management, and trade promotion, the brutal fact is that few companies can simultaneously develop all these capabilities, let alone the myriad other capabilities a large company needs in doses small and large. For any company, some subset of functional capabilities is more important than others to transform its strategy into sustained growth.

A capabilities plan identifies the tools and know-how that can bring the business focus to life. It can point to necessary new capabilities, or guide the further development of capabilities in which the company is already a leader. Procter & Gamble has built an unparalleled R&D capability, invested generously in innovation, and developed processes and methodologies for leveraging technology innovations across businesses. One result: Crest Whitestrips, a blockbuster innovation that combined bleaching, dental care, and adhesive technology.

Campbell Soup Company has a capability set that centers on convenience — unsurprisingly, considering its business focus is convenience food. That focus is realized through capabilities in research, customer relationship management, and sales force management, among other capabilities.

For example, to make it easy for supermarket shoppers to buy Campbell soups, the company has created an in-store display system that shelves each variety of soup in rows on a sloped rack. When a shopper takes one unit, another slides handily to the front. While seemingly simple, the system actually was the result of a series of insights into both consumer and retailer needs. Campbell consumer researchers discovered that a shopper who wants to buy low-salt cream of mushroom soup and doesn’t see it on the shelf will hunt behind the cream of broccoli and the chicken noodle, shuffle the adjacent rows, and leave frustrated if the desired product can’t be found. The disarray creates difficulty — and cost — for the retailer, who must restore order to the shelves. Campbell’s solution solved the problem for both the retailer and the consumer. People see what they’re looking for immediately or they immediately see that it’s out of stock. Because there’s no more rooting around at the back of deep shelves, the retailer keeps a tidy display and has a reliable indicator of stock level. Getting this concept to work also required additional training of the retail force and a dedicated effort to get retailers’ “buy-in” on the new shelves.

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  1. Paul F. Kocourek and Paul Hyde, “The Model 2 Organization: Making Your Company Safe for Zealots,” s+b, First Quarter 2001; Click here. 
  2. Charles Fishman, “The Wal-Mart You Don’t Know,” Fast Company, No. 77 (Dec. 2003); Click here. 
  3. Jim Collins, Good to Great: Why Some Companies Make the Leap … and Others Don’t (HarperBusiness, 2001)
  4. Gregory Melich, “Wal-Mart: Yes They Can, If Allowed,” Morgan Stanley Equity Research Report, February 12, 2004
  5. Procter & Gamble 2003 Annual Report: Click here.
  6. Procter & Gamble: Click here. 
  7. Gillette: Click here. 
  8. Kraft: Click here.
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