Whitaker Irvin, Jr. is CEO of Q Hydrogen, which is developing a new technology for turning water into clean, efficient, renewable hydrogen.
The one thing most truly successful businesses have in common is that they offer a unique solution that solves a specific problem. You can’t be all things to all people. When companies expand too broadly or too quickly or reach into areas that are secondary to their primary brand or expertise, they often end up stretching too thin and missing the mark.
This has never been more evident than during the past year. As the pandemic crunched supply chains and forced consumers to reevaluate their needs vs. wants, some companies typically known for adding more products to their lines began reducing their offerings to focus on what consumers most desired and what would be most profitable. International brands, such as Coca-Cola, Mondelez and General Mills, all took drastic measures to reduce their offerings or secure their supply chains in 2020. And from my perspective, each is taking a good, hard look at how many varieties of products they really need to be producing.
Look at Oreo, for example: The cookie’s maker, Mondelez, saw a spike in demand for some products, so it sped up production on its popular items, such as party-sized Oreos, and slowed down production on more fringe offerings, such as single-serve packs.
Brands can do just fine by offering less. According to CNN, “With smaller product portfolios, companies can also narrow their advertising, distribution and sales efforts, focusing funds and energy on a smaller number of items.” Furthermore, according to Stephen Wilson, co-author of Growth in the Age of Complexity, via the Wall Street Journal (registration required), “About 40% of companies in the S&P 500 are becoming less profitable as they grow.” Complexity is obviously something we have not been lacking over the past 12 months. In his book, Wilson referred to what he calls the “growth paradox,” which is the idea that many of the actions companies take in a bid to drive growth fundamentally impede their ability to grow.
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So, let’s return to my original point about not trying to be all things to all people. The pandemic has shone a bright light on what consumers need across brands and industries alike. According to Xiang (Sean) Wan, associate professor of logistics and supply chain management at Ohio State University who has researched SKU rationalization, “Many people think that the more SKUs, the more you can satisfy the customer’s preference better, but too much of a product variety may not be a good thing.”
As an entrepreneur, you need to ask yourself: Is your ultimate goal the growth of your company and gaining market share, or is it more about making a profit by giving consumers what they want and need? Your brand might not be a household name (yet), but that shouldn’t stop you from evaluating what success looks like for your particular company and offerings. Do you need to expand or contract?
In a recent podcast interview, the host asked me a bit of a curveball question about my company’s technology. He was wondering if, because our technology can create hydrogen from water, it could possibly be used to split elements like carbon dioxide or others. Theoretically, the patents we have could be used for that kind of work, and we could try expanding its uses right away. However, this would cause more problems than it would solve internally by distracting from our current purpose.
Right now, we are focused on hydrogen, which is a very hot market and something we’ve been working toward for decades. Splitting our focus by trying to enter other fields — even if those efforts could end up bringing in revenue — would bring far less value to our business and to the marketplace than sticking to what we know. At least for now.
My advice is to know what you are excellent at and go all-in.