Tuesday, August 23, 2005

Down with “One Stop Shopping!”

If there’s one phrase I’d eliminate from corporate strategy sessions right away, it’s “one stop shopping”. This is a phrase that is diabolical in its effects, for it often makes otherwise sensible executives salivate with infantile glee. Their eyes glaze as they visualize incoming hordes of customers spending gobs of money and never leaving for another competitor, because somehow, the company magically provides them with an all-inclusive integrated A to Z menu of terrific products and services that they absolutely must have, forever.

There’s only one problem with this vision. It’s a fantasy. The underlying assumption is that customers will comply with this rosy scenario. They don’t. As one of my clients told me: “Just because I keep a couple checking and money market accounts for quick liquidity at Bank X, why would Bank X assume that I’ll let them issue my credit cards or manage my retirement portfolio?” When Phil Condit headed Boeing a few years ago, he stated flatly that “we don’t buy engines, auxiliary power units, and avionics on one purchase order, and we don’t expect to in the future.” Instead, the company continues to scan the global marketplace for—surprise!—the suppliers that can provide the best price-value mix in each product line, and then buys accordingly.

When AT&T was still independent, it learned this lesson the hard way. During the 1980’s-1990’s debacles under CEO’s Bob Allen and Mike Armstrong, the strategic premise was that customers wanted to buy all their telecom services (long-distance, Internet, cable TV, webTV, cellular, etc.) from one provider. To make this “all-things-to-all-customers” menu-building even remotely possible, and scalable, AT&T for years binged on massive, debt-ridden acquisitions.

The only problem is that the darn customers didn’t cooperate. Like intransigent children, we insisted on picking and choosing different services from different providers, depending on where we’d get optimal value. And on the institutional end, it got worse: corporate customers became increasingly wary of tying their fortunes solely to one provider, and like individual customers, they chose AT&T for one or two things and found better alternatives for the remainder elsewhere—a tale that all suppliers have been hearing with increasing frequency. Darn those customers—they consistently screw up our carefully developed strategic plans, which is why Armstrong, before his ignominious departure, was frantically considering everything from divestiture to unbundling to write-offs as the company’s stock continued to tumble south.

I don’t care what your consultants and investment bankers tell you, you can’t do it all, and even if you wanted to, customers wouldn’t let you. So concentrate on doing a few things really great, not a whole bunch of things with mediocrity. Pay close attention: The wider the net you try to cast, the more cumbersome, costly and complicated your organization will be, and the more your company’s talent, resources, management attention, creative capacity and customer care will be spread too thin, or simply scattered in a bewildering fashion.

To paraphrase the famous "Field of Dreams" line, if you keep on building it, they won’t come. And then you’re stuck with a big empty stadium.

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