March 29, 2019
While it’s easy for managers to get caught up in everyday project oversight and execution, it is important to pay attention to how your company is evolving alongside internal and external forces. Internal forces include the maturation of your product line or services and a desire to enhance existing offerings (thus broadening market size) and accelerate revenue growth. External forces include new competitive pressures or a shift in market interests or needs.
As part of this evaluation, you must stay attuned to opportunities to diversify your business’s range of products and services or field of operation. Diversification through product enhancements, new offerings, or new market penetration provides a venue for continued revenue growth.
An interesting exercise for managers who are considering diversification is to evaluate the company’s receptivity to such change. Senior management must be willing to invest time and money to move forward into new arenas and accept the risks involved. This cannot be a passive desire, but rather must translate into an active effort.
One indicator of a forward-thinking view is when management, historically, has spent time on field research, actively soliciting input from customers and vendors. Another technique is the “trial balloon” approach: Pick a plausible diversification candidate and note management’s reaction to the idea. The goal is to initiate a group discussion of this and other diversification options, opportunities, and risks.
This analysis should help determine whether to expand your business in line with your current model or embellish it through diversification. Here are some signs the time is right to at least investigate a diversification strategy or to develop and act on one:
These signs may also indicate that your market segment is maturing and thus no longer offering the evolutionary expansion opportunities formerly available. This is where diversification could come into play in the form of a significant revenue-building supplement to your marketing program, product/service offering, or target audience.
If you choose to diversify, next steps would include carefully planning your diversification strategy and ultimately implementing it. Consider these comments that come from experience:
A final comment: take action. Or as my favorite saying goes, “If you rest, you rust.” Remind yourself that change is occurring at an ever-accelerating rate. You must evolve with it or risk being left behind.