One of the most common pieces of advice that entrepreneurs receive related to business is to start small, then expand. And that’s exactly what many companies do – they focus on getting a handle on one offering, before expanding to multiple offerings. There isn’t anything wrong with this strategy as a starting point. By focusing on one offering, a company can put their time and effort into making that one thing the best that it can be to stand out from the competition.
But as a company grows, entrepreneurs need to be thinking of the next step they can take to get ahead. Too many businesses fall into a trap of complacency as they become comfortable in their daily work and become blinded to the opportunities for growth.
What these businesses are forgetting about though is that diversification is crucial to ensure your business continues to grow. Yes, it can be terrifying to try something new, but the benefits diversification will bring outweigh the risks in the end. Whether you find yourself debating on an opportunity to add a new product or service to your business, or debating on opening another location, you should take that diversification risk.
We know this is one of those things that is easier said than done, which is why we’ve compiled a few tips and tricks on how your company can diversify, as well as some real examples of how diversification has been successful with businesses across the globe. Read on below to learn more.
How to Diversify Your Business
Ensure That Your Team Is Ready
Before you think about expanding your business, especially brick and mortar stores that are thinking about opening a second location, you have to ensure that your team is prepared for that step. It’s important to assess your team and be aware of what talents you have and what you’re lacking.
You may have to hire or train current employees to do new jobs. Work on strengthening your team and get them excited for the new step. When your company is making a big step, especially if it’s been a while, you want to have an exciting buzz around the company. Your employees should be excited about the future and what’s around the corner.
Make Sure It Helps The Customer
The golden rule of diversifying; it has to help the customer. You should always add value to the customer and ensure that it benefits them. Whether it’s opening a new location or adding on a new product, it should help your customers. If you have something that your customers have been requesting or if you have customers traveling from a distance to come to your store, then ensure that you see to their needs. Open up a second location at the place where your customers are traveling from and, if possible, give them what they’re requesting. Ask their advice on your next step and truly listen to what they have to say.
Ensure That You’re Experienced In Your New Market
Expansion and add ons are great. They’re wonderful. But it’s important that you ensure that you have experience in what you’re adding on. You’ll want to add on something that you already have experience with and that your employees have worked with before. This isn’t to say that it all has to be in the same market, but a basic understanding of what you’re getting yourself into is required.
Ask yourself if you’re capable of giving this to customers. Ask if your customers will like it. Does it fit into your company? Do your employees know about it?
Answer these questions honestly; it can make all the difference in whether or not your diversifying will be a success or not.
Make Sure That You’re Ready
The most crucial part of diversifying, and the only true way to know if you’ll succeed when doing it, is to ensure that your company is ready for that next step. Too many businesses have leaped prematurely out of pure boredom and it’s resulted in lasting consequences on their company.
5 Business Diversification Examples
Now that you know how to diversify your business, you may be wondering what successful business diversification looks like. Below are 5 examples of real ways that 5 businesses have successfully diversified.
Amazon is everywhere – everywhere you turn, you see something that belongs to (or came from) the company. That’s all because of an effective diversification strategy. The company has grown to generate $386 billion in 2020, so what they have done, has worked.
What started as a bookstore in 1995 has grown to sell video games, multimedia, consumer electronics, software, homeware, toys, and so much more. Amazon has always dreamt big, though, constantly on the search for their next expansion.
They first practiced diversification with their offerings, but as of recently, they have diversified to become a full-on technology company. Now the Amazon umbrella also includes Amazon Web Services, the Amazon Echo and Alexa, Amazon Prime Video, Amazon Music, Amazon Air, a cloud storage platform, and even a movie studio. With every new offering that Amazon has launched, competitors have become more and more concerned, and for good reason. Every market Amazon has gone into, they have dominated.
Like Amazon, Apple is just as much of a globally recognized brand. And just like Amazon, Apple has also practiced diversification with its business model. Unlike Amazon, though, Apple’s model has been focused on related diversification, meaning that they develop new products that share something in common with their already existing products. In simple terms, Apple has made sure that there’s a commonality between each product.
Apple first started as a computer company and was doing well in this industry until Microsoft delivered a cheaper and simpler PC alternative. It was then that Apple began to diversify its business. Apple launched an iPod, iTunes software, and an iPhone. Once Apple mastered those products, they expanded again to offer additional technology items like Apple watches, tablets, smart audio, and even an electric vehicle! What has worked for Apple is being able to use the same technology across various products. This has allowed them to diversify their offerings and turn the company into one of the highest-grossing businesses today.
Canon’s diversification strategy was different from Apple’s and Amazon’s. Unlike those businesses, Canon shifted its focus to small and midsize businesses, instead of solely consumers.
Instead of expanding their product line to include things beyond cameras for their customers, they created an entirely new product line of office equipment for businesses. Canon also opted for dealers to help with selling their machines rather than direct sales. This strategy was different than many of their competitors. While their competitors were focused on speed, Canon was focused on quality and that helped them grow and succeed.
4. Virgin Group
Virgin Group’s diversification strategy includes a little bit of this, a little bit of that. While they expanded some of their services based on commonalities, other expansions were entirely within a new market.
For instance, Virgin Media and Virgin Records share similarities, but Virgin Group’s expansions to mobile phones, Virgin Atlantic Airways, Virgin Holiday, Virgin Galactic, and Virgin Money are a little all over the place. But what Richard Branson has done with this company works. He sees an opportunity and penetrates the market so he can be not only a competitor in it but also a leader. Branson understands that with more industries in his Virgin family, there’s more opportunity for success.
5. The Walt Disney Company
Like the other examples, The Walt Disney Company has followed a similar diversification strategy. The company first started as one that produced animated movies, which is what most of us associate with Disney. The company has since expanded to include theme parks, vacation properties, live entertainment, TV broadcasting, retail, and so much more.
What Walt Disney has done is make their entire brand (which consists of many different products and offerings) an experience. Disney fans are loyal fans and year after year families travel miles to be reminded of the magic they felt as children. And that magic is made possible because Walt Disney has put a focus on making sure every expansion of their brand conveys that same magic. That way, with every new product or offering, Disney can feel confident that their customers will follow.
While these five examples are all large-scale businesses, businesses of all sizes have taken on this practice. 2022 is a new year, which means you have a whole year to make a splash in a new market, or with a new product. But first, take an unbiased look at your company and assess it. Is it ready? Do you think you can do better than your competition in the market or are you good where you’re at? Every company is different and may reach this point at different times. Make sure that it’s the right thing to do for your company, and that you and your employees are ready, before leaping. And when you are ready to leap, the possibilities for diversification are endless.