What business are you in?
Every MBA student hears about the story of the railroad industry. As the need for transportation grew and grew, the railroad industry failed to capture growth. It thought it was in the railroad business and failed to realize it was in the transportation business.
More recently, Blockbuster video hired big box retail executives to help grow its footprint. They thought they were in the big-box retail business and failed to realize they were in the content delivery business. Blockbuster declined to purchase Netflix in 2000 for $50M. Blockbuster – as a store – is long deceased and Netflix now has a $56Billion market cap.
Those are two examples of failure. Here are two examples of enduring success:
- “We are in the business of democratizing the skies.” – Herb Kelleher. Founder, Southwest Airlines.
- “We are in the reliability business.” FedEx
Asking, “What business are we in?” is a clarifying question.
Increasingly, we’re asking organizations to answer this in TWO ways.
What business are you in? (What is your promise?)
What business are you in? (What is your model focus?)
One is aspirational — around a customer promise and one is operational.
I think it could be argued that I’m really asking for mission + strategy. And… I am okay with that. In the real world there are many different ways to ask questions to arrive at clarity. The ‘What business are you in’ is a FOCUS question, we’re just coloring it with mission and strategy.
ALL of the examples above illustrate a statement of (customer) PROMISE. I don’t think an organization can really be strategic if it doesn’t focus on its core operation. As the examples illustrate, they can’t endure in IMPACT if they don’t know their promise.