David Fisher doesn’t mind if companies act a bit like pigs. Healthy growth can be good.
But there’s a fine line between a robust appetite and the route to the slaughterhouse. Before Fisher became the CEO of optionsXpress Inc., he heard the analogy all the time from his previous boss, the CEO of Potbelly Sandwich Works.
“Pigs get fat. Hogs get slaughtered,” Fisher says. “It means it’s OK to want things and to want to go bigger and to want to succeed and to fight for your position, but there’s a limit. You should always understand that limit and not try to be too greedy.”
Fisher considers new market opportunities while remaining mindful of where the limit is beyond the core focus of optionsXpress, a Chicago-based online stockbroker for retail investors. He weighs every opportunity against its focus on the retail customer base, which has driven the company’s success.
“What I keep on coming back to is how we got to where we are today,” says Fisher, who has more than 400 employees. “What was the basis of our success? It’s always been the focus on the retail investor. That’s where we’ve really been able to differentiate, where we’ve really been able to excel.”
The company’s customer assets increased to $7 billion in 2009, up 43 percent from the prior year and 20 percent from the firm’s record high, which came before the financial crisis. Its number of accounts continues to increase steadily, as it had more than 360,000 customers in May.
If you ask Fisher, it’s all because the company stays glued to its core. Here’s how he maintains focus to drive growth.Evaluate opportunities
A strict diet can keep a pig from becoming a hog. Fisher continually evaluates what makes his company healthy so he knows how to keep it growing beyond 2009 net revenue of $233.4 million.
“You have to figure out why you’re different,” he says. “Why have you succeeded? Why are you succeeding where others haven’t? What differentiates your company from others? Start with those core questions.”
Fisher found answers when he took his management team off site. But their perceptions just reflected what customer feedback already revealed. Customers are the best source for defining your differentiation.
“How you are differentiated is clearly based a lot on what your customers are telling you,” Fisher says. “That’s just through: Are you growing your business? Are your customers happy? Are you getting more customers than you’re losing? What are they telling you as part of research? How do you stack up against your competitors? How do you stack up against where you were a couple years ago? Understanding what your customers think about your business is critical.”
Fisher’s team deals with several thousand customer interactions daily. The team stores and analyzes feedback to find patterns in customers’ perceptions and problems. The team also conducts annual industrywide surveys to see how the company stacks up against competitors.
That information reveals your core through the lens of why customers prefer you over the competition.
“It’s a lot of data-mining and statistical analysis, using tools to help sift through the data, finding those patterns,” Fisher says. “A decade or two ago, you would have had to sift through those very manually. Today, there’s great software that really helps identify patterns in customer interactions.”
That’s good, because that data is only half the equation. You also need to track larger industry trends to make sure you’re positioned for growth within your core.
“If you say, ‘This is our core area of focus,’ you need to understand the opportunity there,” Fisher says. “It does you no good to have an area of focus that has zero additional growth. It’s understanding what the market looks like today. How fast is it growing? Understanding how large the opportunity is is extremely important to telling you whether or not you should keep building in that area.”
The prospective customer base can help determine growth opportunities.
“We also look at it from the customer perspective, the demand,” Fisher says. “How many retail customers are out there? How many of them are using these products? Where do we think we can penetrate into by looking at the type of customers that are out there, their demographics, how they compare to the demographics of customers using the products today?”
Fisher looks at options and futures volumes in the market and at customers who trade them and then forecasts trajectories. Of about 40 million people trading online, only 10 percent currently use options and futures products, leaving untapped potential in online investing. With obvious room to grow, it makes more sense for optionsXpress to continue expanding its core focus than to get distracted by new offerings. When you control significant market share, then it may be time to branch out.
Staying committed to the process of evaluating and re-evaluating the differentiators that define your core can keep your company healthy.
“You’re trying to take a lot of numbers and a lot of statistics and a lot of data and then trying to make predictions based on where the industry has been and where you think it’s going,” Fisher says. “You’re not always going to be 100 percent right, but that’s why you have to keep re-evaluating it. You don’t make a decision saying, ‘This is our focus,’ and then lock it in a safe for the next 10 years.”Make your core clear
Once you’re sure about your core, get your employees on board with clear, constant communication.
“Internally, it’s just part of the dialogue,” Fisher says. “When you’re going through development projects, strategic planning, the budgeting process for a year, find opportunities to say, ‘How does this fit into our retail focus? How’s this driving our retail business?’ [It’s] letting people know that those retail-focused projects are where we’re going to be spending our time.”
When employees suggest ideas, the expectation is that they’ve already considered that core focus. Employees are less likely to fight it or step outside of it if you’ve clearly explained what your core is and why.
“A lot of that goes to the upfront messaging,” Fisher says. “You can’t just say, ‘We’re retail.’ You have to explain why and engage people in that; why is that the decision-making?
“People know this is our core. This is where we came from. This is what we’re better at than anybody else and here’s why. If you walk people through why that’s your focus, you don’t have to spend as much time defending it throughout the years.”
While communication about the core is built into every planning process, Fisher also finds ways to sneak it into everyday announcements.
“Almost any time I send out an e-mail to the company no matter what it’s about, it could be the date of our summer happy hour, an award we’re getting, a promotion I always try to talk about our focus on the retail investors and our focus on innovation,” he says. “You can’t try to communicate 10 things at a time. So I’ve really focused on communicating our core retail business that’s what’s generated success [and] that’s what’s going to generate continued success.”
The key, regardless of how you communicate, is that you do it relentlessly.
“It’s almost impossible inside a corporation to overcommunicate,” Fisher says. “People are focused on their day-to-day tasks. When you’re trying to get some of these bigger ideas across, you might be thinking about them every day but not everyone else in the company is thinking about them every day. You really have to communicate to the point where you’re just positive you’re overcommunicating, and then communicate even a little bit more.”
The more you communicate your core, the easier it gets. By keeping distractions at bay, you can actually add value to your core.
“At the board meeting, the conversations stay more focused around the core as opposed to getting questions, ‘Why aren’t we doing this?’” Fisher says. “Now that we’ve done a better job defining and communicating our core, it actually helps to keep the meetings focused on trying to add value around our core.”Measure opportunities against your core
Now your organization is rallied around your core. But the real test comes when an opportunity crosses your desk, because you have to decide whether it fits your focus.
That happened to Fisher about four years ago when the company contemplated expanding beyond its major products mostly options, along with stocks, bonds and mutual funds to futures and cash foreign exchange.
The first question, obviously, is whether an opportunity lies within your core.
Both futures and foreign exchange could be retail products, so they passed the initial test.
If an opportunity appears to be in your core, then you compare and contrast it with your current offerings.
“They were a little different product than we were trading,” Fisher says. “We started saying, ‘How are these products alike, and how are they (different)?’ and that led us to our decision-making.”
Futures, for example, are exchange-traded and centrally cleared. To optionsXpress, which traditionally acted as a pure broker and earned commission on trade, buying and selling futures wasn’t much different from buying or selling options. Because of the similarities, the company picked it up. Futures now make up 20 percent of its business.
Foreign exchange is not centrally cleared. It’s traded dealer-to-dealer without commission. It looked very different from the current offerings, so Fisher steered clear.
If you’ve clearly defined your core already, it’s less challenging to spot outliers. You’ve already established a measuring stick for opportunities and a reasoning to explain your decision.
“When you’re communicating internally, it’s all about the company’s goals and how does this fit into our goals. It’s not personal,” Fisher says. “If you’re making a decision internally, it’s not because this manager is better than that manager or this project is better than that project. It’s about what are the goals and what best matches up with our goals?”
Saying no gets easier when you use that consistent model and even easier after you make mistakes.
“All you’ve got to do is once or twice go down that path and see how distracting they are, and then you realize you just don’t want to do that,” Fisher says. “That’s the advantage of having spent the time really defining that area of focus is that now it is easier to say no. It’s not making some arbitrary decision: ‘My gut tells me no,’ or doing more and more research to try to prove to yourself. No, it’s just, ‘Look, this is not what we’ve decided should be our core area of focus.’”
Don’t be afraid to say no to opportunities when they don’t fit your focus. Consistency in decision-making will convince the organization that you’re intent on sticking to your core.
“You say no a couple times to those types of projects and people start getting the idea that, ‘OK, this really is our focus and if I want to succeed, that’s where I need to spend my time,’” Fisher says. “The limiting factor is our time, and any time you’re spending outside your core focus is going to take away from your success.”
Saying no to customers can be more difficult than telling employees. It takes a different approach but the same guidelines.
“When you’re talking to customers, it’s always personal, because it’s personal to them,” Fisher says. “So you always need to have it focused around the customer: ‘I understand why you want this project, this tool, this decision, whatever. I understand why that would benefit you. I understand that you think that’s great, and you’re right, this would be a great idea. We’re not going to be able to do it right now because of X, Y and Z.’ You have to acknowledge that it’s more personal when you’re dealing with those customers.”
As long as you’re clear and consistent about your decision in terms of alignment to your core focus, people will get it.
Then, it’s on to the next opportunity and the continual re-evaluation of your core.
“The easiest mistake is to get too locked into a decision,” Fisher says. “You want to make sure you’ve defined your core and you’re sticking to your core, but you’ve also got to give yourself the opportunity to reevaluate it from time to time so you don’t end up going down a dead end.”
How to reach: optionsXpress Inc., (888) 280-8020 or www.optionsxpress.com