“For me, building a business is all about doing something to be proud of, bringing talented people together and creating something that’s going to make a real difference to other peoples’ lives.” Richard Branson
Business diversification like the old diversification rule -“Don’t throw all your eggs in one basket” must be evaluated as everything today changes so rapidly. There are so many examples of organizations no longer around that did not adapt to a diversification of business strategy. Borders Bookstore, Blockbuster Video and Polaroid. Also, an interesting industry that has changed dramatically is the professional speaking business. Many professional speakers who lacked business diversification strategies did not survive the great recession of 2008 and corporate cuts to company training programs.
Diversification of the business could include evaluating new products/services that are related to the core business. Also, evaluating diversification options that could offer an overall more comprehensive solution to customer problems – potentially a strategic acquisition.
Global diversification is another alternative to reduce risk exposure and capture other markets (especially with technology today, the hurdle rates are significantly less than 20 years ago, but still requires proper due diligence and trustworthy partners.) If you have a manufacturing or bricks and mortar company, are there opportunities to diversify with the use of online sales? An interesting reverse example of this strategy is Amazon. They have now down a reverse with actually building bricks and mortar stores with expectations of 300-400 stores.
Look for growth trends and areas that offer friendly business tax rates, growing populations and maybe it might make sense to evaluate setting up an office in that location.
One often-overlooked business diversification strategy is to change the current product/service to a unique new customer base and a segmented market. For example, targeting an old-line product with adaption strategy to a millennial population that has appeal. It’s important to evaluate the demographic target and examine the numbers of the potential with the new target market by capturing a small segment.
Diversification’s main goal is to expand business and reduce risk; however there can be many challenges especially lack of focus on the main business for a set time period. Don’t underestimate the time and manpower necessary (even it most of the work can be outsourced or strategic partnerships) to give the strategy a best effort strategy.
Personally, diversification of businesses has helped me time and time again, when market dynamics and laws changed or eliminated core aspects to my businesses. The events of 9/11 and the 2008 Great recession have been learning lessons for every entrepreneur.
Evaluate diversification into your business only where it fits and learn from the Master Un-Related Business Diversifier – Sir Richard Branson. Virgin currently has over 300 companies under its global brand. Check out a few of Richards, books for ideas and how to consider adapting a diversification strategy into your business.
The Virgin Way
Screw Business As Usual
Business Stripped Bare