Strategy Means Saying "No"

I was helping a prominent global company explore the strategy of achieving high levels of client service. We were discussing ways of investing resources and redesigning processes to accomplish this goal. The longer the discussion continued, the more uncomfortable some members of the organization became.

“But what about the clients and customers who don’t want all this high-touch contact?” they asked me. “What are we supposed to do with them? Won’t we scare away a significant portion of our current customer base by doing things they don’t want?”


“Yes, you will,” I replied. “A strategy is not just choosing a target market, but is about actually designing an operation that will consistently deliver the superior client benefits you claim to provide.

“However, each decision you make to be more effective at delivering the preferences of those you target will (inevitably, inescapably, unavoidably) make you less attractive to clients or market segments that look for different benefits.

“But consider the alternative,” I continued. “You could try to design your operations to meet a wide variety of preferences and needs, serving each client or customer group differently, according to their individual wishes.

“Your market appeal will then come down to ‘tell us what you want us to do for you and we’ll do that. We’ll do something different for other people tomorrow!’

“You may get by with this approach, but you will be unlikely to achieve a competitive differentiation or reputation, except as people who, as long as they are getting paid, will do anything for anyone. Which is not an image I think you want to have.”

Finally, someone said out loud what was on everybody’s mind: “But do we have the courage to turn away business? Do we really have the confidence to tell paying customers that we are not right for them?”

My answer? “Not only should you do that, but the only way you can achieve any strategic distinction is to do that. Strategy is deciding whose business you are going to turn away.”

The Focused Factory

One of the first lessons I was taught at Harvard Business School in the 1970s was Wickham Skinner’s principle of the “focused factory.” No operation, Professor Skinner pointed out, can be good at everything simultaneously.

An operation designed to provide the highest quality is unlikely to be the one that achieves the lowest cost, and one that can respond to a wide variety of customized requests will be unlikely to provide fast response and turnaround. Any business that tried to deliver all four virtues of quality, cost, variety and speed would be doomed to failure.

This is not just an operational point, but a marketing one. To be differentiated in the eyes of the marketplace, you have to be known for something in particular. It’s not enough just to be known. (That’s name awareness, which is not the same thing as being seen as differentiated.) And you can’t have a reputation for being something specific if you only do it occasionally.

The very essence of having a strategy is being selective about choosing the criteria on which a firm wishes to compete, and then being creative and disciplined in designing an operation that is finely tuned to deliver those particular virtues.

Consider McDonalds. For any customer that truly places a premium on low cost and speed, McDonalds is hard to beat, because it has been optimized around a clear market positioning.

However, if someone were to walk into a McDonald’s and say, “I feel like having a curry today,” the service provider would not reply “Sure. That will increase our revenues. Let me shut down the grill and make you one.”

Instead, the reply (except, perhaps, in India) would be, “I’m sorry, but we are not designed to meet every possible need. Perhaps I can help you find somewhere nearby that can give you what you want?”

As companies keep discovering to their cost, it is certain business decay if you try to please all possible market segments. The broader the group of clients to which you try to appeal, or the wider the range of services you try to provide, the less customized your operation can be to each segment within that group.
If you never say “no,” you will just be one more undifferentiated firm, trying to do a little bit of everything and, as Skinner pointed out, will almost certainly be superb at none of them.