Companies that historically show product strategic focus perform substantially better over extended periods than companies that implement multiple technologies and/or seek market diversity. A quick telephone follow- up with the sampled firms shows that this hypothesis is still on target. The ten top companies in terms of product focus have an average product- related sales level of approximately $56 million. This contrasts sharply with the bottom ten companies, again ranked in terms of product focus, whose average sales are approximately $3 million. The research demonstrates that managing wide-scale product diversity is, at the least, a most difficult endeavor for the small- or medium-sized technology-based company. Conceivably, larger firms or less technology-dependent ones might be better able to handle greater product-line diversity, although the strategic advice of "stick to your knitting" ( Peters and Waterman, 1982) and earlier studies of diversification ( Rumelt, 1974) and acquisition strategy ( Ravenscraft and Scherer, 1987) also generally support the importance of focus for large companies.
The data do evidence, however, an "inside limit" to the strategic focus concept. Not surprisingly, companies that show a total lack of technological aggressiveness, undertaking only minor improvements to their core technology, do not perform as well as companies that over time make major enhancements to their core capabilities. This is true also in regard to better performance being achieved by firms that seek market expansion through steady introductions of new functionality, moving toward related customer groups, and adding distribution channels to exploit fully the available marketplace.
Focal Point Variance