Cingular was the name of a company that sold mobile phone service in the United States. At some point, they were bought out by AT&T. Acquiring Cingular was a reliable way to expand the business. I ended up working in the former division of Cingular. The project was to build a good prototype for the next generation U-verse TV service.
The project was to create a TV channel switching experience that fully replaced traditional TV. That is, when you switch channels moving from one high definition video to the next would be seamless as switching regular TV channels. While I was there, I couldn’t help but wonder what were we doing working on TV entertainment in the first place?
As an hourly contractor, I thought I would be working on some novel telecommunications system. Instead, I was working on a replacement for television. I liked the project and it was fun. However, my business brain couldn’t really make sense of it at the time.
Having come up in the Internet error.the.com‘s, I knew that continent was king. Controlling cotton seemed like a good way to achieve fast revenue growth. I suppose if you control the delivery system for contacts and the constant then in theory you could achieve synergies. Still, I couldn’t figure it out and I figured someone smarter than I at the business level knew what they were doing.
A business concept that I did embrace and saw as more reliable is the concept of core competency. The idea of core competency is that you are more likely to build your business better focusing on what you’re really good at than to take risks on business endeavors that are way outside your core business offering.
And example is the lemonade stand. You’re really good at selling lemonade and there’s no issue selling cakes at the same time. Cakes are lateral to what you do with lemonade. On the other hand, you may run into issues trying to sell tennis shoes at a lemonade stand. Maybe you are the one in 1 million who can pull it off, but tennis shoes and lemonade at the point of purchase generally don’t mix. The other problem you run into is do you expand the lemonade side of the business or do you expand the tennis shoe side of the business?
Many companies want to buy into Internet and they want to latch on to what companies like Google we’re doing with YouTube. However, in the case of AT&T, they already had the advantage in that they controlled the lines of distribution. Instead of expanding into the constant business, it would’ve made more sense to quadruple down on 5G investments so that they could be 10 years ahead on 5G rather than catching up to Huawei.
Sometimes going outside your core competency does make sense. The lesson though is if you stretched too far and you really haven’t thought it through and don’t have a real solid plan you could end up spending just as much money chasing a new direction as you would have gain in the previous direction.
Another example is Apple sells MacBooks and IMAX. They have from nearly the beginning. Apple has always sold a traditional computer. Expanding into cell phones was kind of a lateral move but not really because what they did is they took the same operating system that they already was good at and put it in a smaller computer where you were able to make phone calls. The watch is the same thing to small computer on your wrist. They are an example of a company that has expanded into areas that branch off their core computing expertise.
At this time, we have seen a 70% jump in Mac and iPhone categories. That is a huge expansion in core computing products. Apple focused on their core competency from the beginning and they’ve had bumps along the way but they’ve always stuck to the computer. While their computers have not always been profitable for them relative to other companies, they’ve maintained a steady focus all these years and have proven how prudent it is in emphasize core competency.
Gautier Talks About Technology 