The word ‘focus’ refers to selectively concentrating on one aspect of the environment while ignoring others. While we focus with our camera to take photographs, we concentrate on a particular object and we ignore the other things. We focus on the object, which we like, which interests us, which we want to capture and share. It’s the same while doing business.

Entrepreneurs, in a way, have the liberty to paint on a plain canvas. Unlike job-holders, who generally need to follow a set format, business leaders can paint whatever they wish to and whatever excites and interests them. However, this needs to be done carefully. Many times, entrepreneurs get over-excited by the prospects of value creation or wealth maximisation in the areas in which they are not yet fully competent at. As entrepreneurs they could be forgiven for being optimistic and creative. They see good business prospects in certain ventures, they also analyse the existence of market for a given business or product. However, they make the blunder of not analysing their own ‘core competencies’ to before jumping headlong into a challenging venture that is often fraught with obstacles.

One prominent example that comes to my mind is that of a gold-medalist MBA graduate, who after having relevant experience in banking and  finance jumped into a hospital venture. The person in this example was highly entrepreneurial, had very good analytical skills of not only the market conditions but also internal factors like finance, systems, legal factors, operation process etc. Despite possessing these qualities and persevering with his hospital venture for more than five years, he failed miserably. The reason: Running a medical business was not his ‘core competency’. He had to rely heavily on medical resources like doctors, nurses, lab technicians and others for the delivery of efficient and quality medical services. By and large, his more than 15 years of banking and finance experience was naturally not relevant in the hospital business, which meant that he had to start from the scratch.  Since he did not have the relevant experience, with passing time, he started losing interest in the business but because he had already invested substantial capital, time and energy, after a certain point, he had to keep pushing for this business, which eventually did not do well. This is a classic example of focusing in the areas, where you do not have relevant core competency.

There could be some exceptions where we could find success stories in similar situations as mentioned above. But I strongly feel that the probability of failures is much higher compared to successes in situations where one enters into a business other than where his or her own core competency lies.

Success stories

Adidas and Nike are sportswear brands that are highly successful. They have focused in the area of sportswear for many years now. We are not sure whether they would have been as successful if they were to diversify into the ‘airline business’. Boeing and Airbus would not and should not venture into the agriculture business because their core competency profile matches with the aircraft manufacturing business for many years and they should expand and keep on focusing in their relevant areas.

Similarly for an education institution that is focused on banking, finance, insurance and business education should not venture into teaching subjects like music and ballet. Companies and institutions achieve success because they focus on their core competencies. Once you have found your niche, customers will readily come to you for your specialised services knowing fully-well that you can add value to their needs/requirements.

I remember reading in an IIM literature, which said, ‘Diversification can become Diworsification’ if not taken forward carefully. In Nepal, we see many examples; the most prominent one is of highly successful educational institutes locking their substantial funds in real estate. This is called an absolutely ‘un-related diversification’. While investing in real estate, these educational institutes were primarily guided by the capital appreciation or arbitrage opportunity, which do not fall into their core competency and when the market went bust, they lost a lot of money. What is worse is that because they lose a lot of money because of this unrelated diversification their overall financial management gets distorted, which directly impacts their core business. As a result, we have seen the downfall of their otherwise successful educational businesses.

It is my hope existing and future entrepreneurs will continue to focus on their core competencies and create a sustainable business model. Understanding what you are good at and focusing on the same is absolutely critical.

Jha is the founder and executive chairman of KFA