One of the attributes that many investors look for in a startup (besides rockstar team, multi-billion dollar market opportunity etc.) is focus. This is understandable, as startups that try to do too many things at once or switch directions too often are more likely to fail. But a blind pursuit of focus can prove counterproductive for an entrepreneur.
Many years ago, a friend of mine invested in a new sushi restaurant concept in Asia. The basic idea was to have an open kitchen in the middle of the restaurant surrounded on all sides by a counter along which customers perched on stools. The chefs prepared a variety of dishes which they placed on a miniature mechanical train that traveled in an endless loop around the counter. Customers simply grabbed the dishes that piqued their fancy as the train went by.
It was a novel idea and customers loved it. Within two years of launch, the entrepreneur had opened a few more restaurants with many more in the pipeline. He had also concluded that the open kitchen was taking up space that he could rather fill with customers. So he reconfigured the seating layout and invested in a central food processing facility that delivered sushi to his restaurants for final assembly.
As it turned out, the central facility had excess capacity. To absorb it, the entrepreneur decided to enter the catering business. This was against the opinion of all his advisors, who asserted that he needed to focus on expanding his chain of restaurants. He disagreed – he felt that catering was complementary and would improve his capital efficiency.
Initially, things went terribly. Disappointed customers expected the train to be part of the catering package since it was so integral to the brand. Through sheer persistence and a dash of ingenuity, the entrepreneur managed to build a portable version of the train. Immediately, the catering business caught fire – no one else in the market had such a cool gimmick.
One day, a catering customer called out of the blue with an unusual request. She was the events manager for a mobile phone manufacturer, and wondered if she could rent the portable train for her phones to ride on as part of the display for her conference booth? Since then, the trains have appeared at multiple events around the world, ferrying everything from diamond jewelry to potted bonsai plants.
Today, while restaurants are the most visible part of the overall business, cut throat competition (including an outfit that features boats instead of trains) has crimped margins. Most of the value is actually in the catering business, which is several times larger and has benefited most from economies of scale. And the “conference services” business, while relatively small, enjoys the lush margins associated with cornering a niche market.
I believe that while it’s important to focus on your current plan of action, it’s just as important to be attentive to, but not distracted by, all the options around you, including those that might appear somewhat serendipitously. Focus must be counterbalanced by adaptability – the art of knowing when and how to reallocate your resources to capitalize on the shifting waves of opportunity.
Not many people remember today that Excite’s original business plan was database search, that PayPal started out writing encryption software, and that Flickr sprang from online gaming roots. If these companies had pursued focus in the literal sense, we probably won’t remember any of them at all.
