Narrow Your Scope to Expand

“From focus comes growth; by narrowing scope one creates expansion.”

(Profit from the Core by Chris Zook and James Allen)

TAM (total addressable market) is hammered into the heads of so many entrepreneurs. Of course, TAM is important. However, on its own, it can also lead teams to chase the wrong idea.

"It's a $50 billion market. We only need to get 1% of the market to be a $500 million company!" has been exclaimed innumerable times during funding pitches and all-hands meetings.

Sometimes (but extremely rarely) that's true.

But what's often times a far better pursuit is to be the market-share leader in a $200 million "niche" market.

As Zook and Allen explain, “Nowhere is the value of focus as clear as in a single-product company fighting for its life against less-focused competitors embedded in large conglomerates with many cross-cutting agendas and tradeoffs.”

Then if you're providing your customers great service and a high-value, mission-critical solution, your customers are going to pull you into new opportunities deeper in the market, which can lead to massive cross-sell opportunities, higher retention rates, and deeper, mutually-beneficial relationships.

Temptations to diversify tug at all of us. Saying "NO" to seemingly big -- but focus-sapping -- opportunities is a key leadership responsibility.