Deep Specialization Creates Deep Value
There is a great article in the Financial Times on deep specialization. It looks inside the font factory and the man who shapes the world’s letters. A font factory is basically a studio that designs the style of the letters you see published in, well, everywhere. We don’t take fonts very seriously. When you read any publication, you don’t worry about the font. But a font creates a certain atmosphere that impacts you.
The impact of fonts
I went to Helsinki, Finland once, and I was astonished by how well designed that airport was, particularly the fonts in the airport. The font was very clean, and I was shocked by how well it was integrated with the airport. It was as if someone designed the font and then designed the airport around it. There was symmetry. After seeing that, I fell in love with that font and have decided to use that kind of thinking in everything we’re doing. That’s the impact of fonts.
You can imagine what this man’s career discussion was like. Can you imagine how many people told him there’s no future in designing fonts? No one even knew what a font lab was, or a foundry as they call it. Before fonts were designed on Macs, they were designed in large pressing labs where fonts were designed with stencils in steel and built into a press that physically pressed the font onto paper. It was very hard to build a font. You had to design a font with a ruler and pencil, and then test it by carving out steel plates. It took forever. It wasn’t easy to iterate these things, so there was no real career there.He has specialized in the middle of the T. The T model says you can either have a breadth of skills, which is the top horizontal part, or you can focus in one area, which is the middle. Click To Tweet
This guy built the world’s most famous font foundry. Today, digital agencies are called foundries as a nod to that history. But his career discussion was that there’s no future in fonts, so why don’t you expand into designing pamphlets, movie posters or birthday cards? But he chose to specialize. When large foundries moved to the Mac, he stayed in fonts. When print moved to digital, he stayed in fonts. When we moved from the Western version of how we deliver fonts to the Asian version, which is very different, he stayed in fonts. In the process of staying in one thing and finding ways to do it better, he has specialized in the middle of the T. The T model says you can either have a breadth of skills, which is the top horizontal part, or you can focus in one area, which is the middle.
The reality is that people who do great things specialize in something. Even a successful generalist has a deep specialization in something, they just have the other skills to buffer them around. The truly amazing things we see in the world are done by people who choose deep specialization path. Even for someone who launches two businesses, it’s specialization in one thing that they carry across multiple businesses.
How do you balance deep specialization with need for diversification?
The question is: What will you specialize in? How does a company specialize while diversifying and managing the resistance stems from employees who believe that you should be doing multiple unrelated things?
There’s always going to be an example of a company that does unrelated things and is doing well—until it doesn’t do well. There are more examples of companies that have deep specialization, and that stayed in business for a long time, and created enormous value rather than companies that are diversified conglomerates and stay that way forever.It comes from deep specialization in risk, in strategy. If we just looked at the best practices in risk, we would come up with something fairly average. Instead, we said, “Over many years, we've been thinking about risk and strategy. How do you… Click To Tweet
Deep specialization in risk in strategy
You need to think about how to specialize. If you look at the pandemic planning work we have—which is available to SLIDES members—the way we analyze how a company can respond to a disaster, pandemic or epidemic doesn’t happen overnight. It comes from deep specialization in risk, in strategy. If we just looked at the best practices in risk, we would come up with something fairly average. Instead, we said, “Over many years, we’ve been thinking about risk and strategy. How do you manage risk? How do you measure risk? What is risk? Is there such a thing as a good risk? Is there such a thing as core risk versus non-core risk? What about critical risk versus non-critical risk? Which risks should be kept on your balance sheet? Which should be kept off your balance sheet?” That comes from specialization.
Deep specialization means giving up certain things
Of course, when you specialize you give up certain things. At the same time, if you do one thing well, you’ll be paid higher versus trying to do many things and being paid a lot less. You still make a lot of money, but your return is a little bit lower.
So as you go into a new year, these themes give you a lot to think about. For every decision you make today, you will see its results in 1, 2, 3, 4 years’ time. Those four years are going to happen. You cannot stop the clock. This is not a basketball game. Whether or not you are ready, whether or not you take the off-ramp and have children or get married or take time away, the world moves on. The people you compete with become better. Some of them will take a timeout because they do think it’s a basketball game.What do you want to be good at? You can't be good at everything, so pick something and go in that direction. Click To Tweet
So ask yourself: What do you want to be good at? You can’t be good at everything, so pick something and go in that direction. Take a look at your last year. We all start off well. We think a year is a long time. Ask yourself. What did I do? What worked? What didn’t work? Was I more productive? Was I more productive last year versus the year before? Productivity is output value, all the increase in your asset values, increase in your income, increase in your intangible assets—which are things you’ve learned—divided by your total input cost, which is the cost to do it and the time you spent to do it. Overall, did you actually get better? The trend should always be positive. If it wasn’t positive, you need to rethink certain things. But it’s a process. You’ll make a lot of mistakes, but you’ll get better.Deep specialization has always been the way capitalism has worked. Companies that specialize in something solve a problem better than someone else. Click To Tweet
Deep specialization has always been the way capitalism has worked. Companies that specialize in something solve a problem better than someone else. They make money, then they get shortsighted and they think they can’t do it any better, so they take that money and invest in some diversified venture, which sometimes works and sometimes doesn’t work—and they destroy capital.
This is an excerpt from Monday Morning 8 a.m. newsletter, issue #10.