On Business Strategy, What Will You Say ‘No’ to This Year?
I bought some stock in a company last week because they said “no” to customers in a big, brave way.
In his best selling book, From Good to Great, Jim Collins calls readers to find their hedgehog concept. A combination of a firm’s passion, unique skill and economic engine, the hedgehog concept must be relevant to customers and uniquely attainable by the company who claims it. Like the quills of a hedgehog that protect it from all predators in the forest, a successful hedgehog concept will make a firm untouchable in the marketplace: resilient and in demand.
For the hedgehog, it took millennia and countless genetic mutations to evolve these quills as a protective mechanism. For entrepreneurs, finding your hedgehog concept is usually evolutionary as well. As Apple would say, “For Every Yes, There Are a Thousand No’s.”
Many of us start out doing the exact opposite, saying “yes” to every customer request. Imagine, for example, you sell solar panels to homeowners and one day a customer asks if you could do a big commercial install? After accepting the job, you realize that commercial permitting is completely different (and far more costly). Your insurance premiums are higher and the city requires a special certification. All of a sudden, this job has taken your focus away from your core customer audience and may put you in the red. John Warrillow tells a very similar story in his business fiction, Built to Sell.
For many of us, saying “yes” to these types of requests got us where where we are today. But what about where we want to go? To find your hedgehog, you must become the curator of your own museum, deciding what to include in the exhibit, and of equal importance, what to exclude. Here’s a great quote that sums it up brilliantly: “The more balls in the air, the less time each one spends in your hands.”
The company I bought is CVS Caremark, you know, the owners of CVS Pharmacy. The thing they said “no” to? Selling cigarettes. Now, it’s not the cigarettes that moved me to buy, it’s the “why?” behind the decision. The CVS management team has a vision to become an integrated health service provider and pharmacy. Via their OneMinuteClinic brand, CVS will offer customers a combo health clinic and pharmacy that allows patients to visit a Nurse Practitioner and walk out the door with an answer to their symptoms, drugs in hand. Relevant to customers? I’d say so. Uniquely attainable? I’m a believer.
Their management team decided that selling cigarettes, which account for $2B worth of sales, at the same time as becoming a source for patient healthcare were incompatible offers. For CVS, their hedgehog will cost them $2 billion in sales. As Jason Fried of 37 Signals (now Basecamp) once said, “Profits aren’t everything. Sometimes you have to prune your winners. That way, you can focus your attention on your bigger winners.”
As small business owners, saying “no” to a customer will likely have a financial impact… but is it the cost of that decision that ultimately matters? Or is it the return on the investment?
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