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New York, April 15 (Bloomberg) -- Companies with good ''first ideas'' like Staples Inc. and Dell Computer Corp. can make fortunes for their founders and investors; the key test is whether they come up with ''second'' and ''third ideas.''
Discerning how they do it explains a lot about current business, said Adrian Slywotzky, principal co-author of ''Profit Patterns: 30 Ways to Anticipate and Profit from Strategic Forces Reshaping Your Business'' (Times Business, $27.50).
''The first good idea gets you very far,'' he told the Bloomberg Forum. Staples Chairman Thomas Stemberg discovered office-supply buyers weren't being well-served, and Dell Chairman Michael Dell learned businesses want to order PCs directly.
''Three, four, five years later, you have to take the idea to the next level, re-order the business model and stay a couple of steps ahead of the competition,'' said Slywotzky, 51, a vice president with the Mercer Management Consulting division of Marsh & McLennan Cos., the world's largest insurance broker.
For new companies like Staples, Dell or Amazon.com Inc., he said, the question is whether they detect the next trend. For older companies, like General Electric Co., Coca-Cola Co. and Walt Disney Co., it's how they sustain growth and serve customers better.
For managers, the questions are ''how does profitability happen in our industry'' and how can they extend their business to fill another need, Slywotzky said, rather than just how to maintain market share. Sometimes a strategic change misfires -- such as Coca-Cola's $700 million acquisition of Columbia Pictures in 1982.
''That was a colossal failure,'' Slywotzky said, although it grew out of the premise that moviegoers drink Coke. The company ''learned enough'' from that mistake and others to move more profitably into other areas, including retail stores and juice lines.
Disney now owns sports teams and the ABC television network. GE moved into the Internet with partnerships with Cnet Inc. and Microsoft Corp.
Cornerstones
Other companies, like Perdue Farms Inc., the No. 3 U.S. poultry company, have profited for years from their ''cornerstone'' businesses, which allows them to charge more for a product because they know how to build upon good customer relationships.
Microsoft is moving from PC to network software. Dell is adding services. Amazon.com is selling more than books Rentokil Initial Plc of England has long sold a lot more than pest-control services, he said.
''These companies have all learned to create a tremendous relationship with customers,'' Slywotzky added.
Apr/15/1999 14:20
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(C) Copyright 1999 Bloomberg L.P.
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