Businesses are always looking for methods to expand and grow, and diversification is one approach that is worth giving some thought to.
Diversification is all about gently pivoting without damaging current revenue stream by building new products, exploring new markets and taking risks.
Most multinational companies already operate in more than two industries and it has been proven that diversification can certainly add value (and dollars) to a business.
If what you are doing in your core business setting is working to your liking, it can pay to broaden your business horizons by deploying diversification planning and strategy, while applying calculated risks.
Learn from the experts
When considering diversification within your own business it could pay to do some research into company’s who have done so successfully in the past.
2008 was the last time a severe recession hit the world, what did businesses do at that time to keep going? What success stories can you find?
One well-known company who have nailed their diversification game is one you’ve likely heard of – Disney.
Back in 1928 when Disney released its first cartoon there was little indication the company would become the unstoppable giant it is today, but it has moved to where it is through measured and consistent diversification strategy.
One year after that first cartoon came out Disney licensed a pencil tablet, before forming the Mickey Mouse Club (MMC) – which became the vehicle for selling its products.
As membership of MMC grew, so too did its product sales, and the company then diversified into music, training and educational videos.
Step-by-step, product-by-product, market-by-market, Disney grew and today they dominate many different industries, with amusement parks, movies, television, clubs, books cruise lines, resort properties, radio broadcasting, musical recordings, animation art and products. These days they have also recently moved into software and streaming through Disney+!
Each diversification strategy was carefully planned and leveraged upon the much-loved Disney name to strengthen its position and continue to create value for its shareholders and customers.
While not all of us can reach the dizzying heights of Disney, a lot can be learned from the way in which they have executed their diversification over their company lifetime.
How could diversification work for you?
There are many different ways you can diversify in business and the one that best suits your business model will depend upon the industry you’re in and what your growth goals are.
Let’s run through a few options for diversifying.
Either way, your plan is to add value to your current business and the lives of new customers you’re seeking out in untapped markets, so keep this in mind along the way.
Adding value through diversification
There is no doubt diversifying can bring many benefits to business.
- The creation of new income streams
- New opportunities for growth and success
- Managing revenues for seasonal or cyclical products
- To increase appeal to existing customers
But the process of diversification should always follow a well-thought-out plan.
Importantly, before diversifying, it is important to ensure you have a profitable and stable core business to build upon.
If you’re not quite there yet, work on this first before you consider how to diversify, or else new products and services could prove to be nothing more than a distraction from what you do at your core.
As always, our hub of multi-disciplinary experts here at Ingredior are here to help.
Our whole-of-business approach encompasses strategic finance, strategic marketing, business development, business strategy and other services required to assist businesses to harness growth while minimizing costs, maximizing returns and setting up for long-term success.
We are available to chat or answer any of your questions.
- Diversification is a big decision, but to survive in the future economy you need to consider more than one core stream of revenue for your business.
- Engage the business from the ground up to get involved in a diversification project. Their input will be invaluable.
- It is important to plan out your objectives – operationally, financially and structurally to lessen the impact on the current business model if it does not work. Equally ensuring the influx, if it works, does not impact your ability to deliver on current business product and service promises to your customers.
Test this theory:
- Do a survey of your customers – are you delivering on their needs?
- You want to have a least 3 items your customers would like you to work on
- Look at the next level of customer ‘subcategory’ – can you service their needs with tweaks to your current offer?
- Additional services or products using commercial partners or supply chain