If we are seen to be diversifying are we signalling failure?

The fact you are considering ‘diversification’ signals you have a realistic position on your own market and business sector. The positive from this is we are following what our customers want and need while strengthening our future business.

The previous article about Diversification has positively revealed the relevance of the ‘why’ you should diversify and the ‘benefits’ and certainly the risks associated.

The largest amount of discussion around the subject is about the type of diversification and areas to consider, but not the acceptance of the ‘need’

The various business disciplines understandably approach this differently so in this article we articulate what we have been asked as direct questions and things we advise to consider in your journey of discovery.

Below we have collated a selection of questions from real businesses along with our response (further guidance will be dealt with on an individual basis):

We have expertise in our sector. If we add categories / sectors will our (future) customers accept us?

Ans – They will if it is correctly explained how you add value and how you already have a positive customer response. It is essential that any business can ‘prove’ and convince all of its competence.

The key point is to ‘research’ the proposed area fully and understand its ‘needs’ this is an essential element of your value proposition

How will we determine if we can be successful?

Ans – key point is that this is a gradual activity and you are (highly) unlikely to be abandoning your core business area – in the main, just adding to it with a linked product or service offer.

Therefore, it can be measured autonomously against a structured plan. Part of the rationale is to decide and define what success looks like. Often, we find the failure to ‘define’ this key area fully and realistically, creates both confusion and poor execution.

If we are looking at sharing facilities or equipment should we announce it?

This has come up a number of times particularly when businesses are looking at projects based on Conglomerate Diversification.

Our advice is always stay close to your new partners and discuss together as they may have different needs and constraints.

However, it is essential to define the exact terms, expectations and actions associated with the project and ensure your communications are both jointly agreed, accurate and shared with the correct audience.

In general, it is always good to share things about your business with your customers that have relevance. We certainly would avoid ‘spin’ but good things or innovative things need to be shared professionally.

If we are seen to be diversifying are we signalling failure?

This comes up time and time again.

The fact you are considering ‘diversification’ signals you have a realistic position on your own market and business sector. The positive from this is we are following what our customers want and need while strengthening our future business.

Interesting point is when discussing with less senior members of the business this question is turned on its head as follows:  we should have done this before, as we notice that business X is doing something similar.

This point is very telling when considering business culture as there is a perceived difference between the ‘leadership’ and the overall business.

Should we have a separate trading entity for noncore activity?

This is often raised on the basis that things will remain the same. We always ask are you doing the same things you were doing 5 years ago and will you be doing the same things in a further 5 years. It is highly unlikely that creating a separate trading entity will have a long- term benefit. The key point is to ensure your customers recognise and trust your ‘brand’ over the long - term journey.

Who’d have thought ‘Virgin’ would have an airline after being a record label early on!

In summary

It is great to have engendered positive responses around any subject. It is equally pleasing to find that our points have been taken forward quickly and decisively.

We would always advocate speak to us early to obtain both structured advice and understand what the process is. What it is not, is to pontificate around exploring options and failing to understand your true ‘current’ position. We always advocate that cars are serviced, people are health checked! Businesses are no different – call us as an external resource to help you to grow your business.

We are independent consultants here to support you in your growth journey. Call us for a free no obligation conversation.

Call Paul on 07742 955 199