Should My Company Diversify?
For most business owners, diversifying seems like a logical step in order to move forward, what more as we’re living in a world of uncertainty. As the adage says “don’t put all of your eggs in one basket”, diversifying makes sense if you want to cut down the risk to the bare minimum, while moving forward and serving your customers. But is it really a requirement for your business?
The answer, not really.
What It Means By Diversifying Your Business
When it comes to diversifying, your business may or may not take a new direction, and can be either a big break or enduring a huge downfall: your business may have wider and bigger reach for potential customers, new branch of networks and subsequently new knowledge, enhancing the brand so the public knows you, and reaping profits afterwards.
That said, this maneuver is also have their own risk (a big one, in fact) that some say it’s gamble in business, putting your past efforts at stake. And the only way to minimize the downside effects is to consider factors and questions to see if diversifying is the path that your business should take, and may it be the right moves for more profits and sustainability in near future.
So what are the factors that you need to look out when considering company diversification?
Factors To Look For When You Want To Diversify
It’s essential to take stock of what your business truly has (strength, capabilities, competitive edge, and even weaknesses) and to use it for making choices on daily basis. And it’s all the more important if you’re considering to change or add a new direction.
To quote in Harvard Business Review, the collective terms of those traits is ‘strategic assets’.
The assessment for each traits needs to be done thoroughly and to see whether it gives your business a competitive edge against well, competitors (examples of competitive edge can be superior distribution, solid company culture, or intensive and updated knowledge of the industry).
Hence the decision to diversify rests solely on the strategic assets that you have/not have at the moment so that your business stays relevant, stays competitive, and stays working in the coming years.
Your company’s position in the market also serves as the determining factor to diversifying.
Generally speaking, you can bet your chances are high if your company holds onto a strong customer base, where the branding is speaks to your customer that they get excited to anything your business has to offer. Of course, at the same time your offer needs to keep up with the ever-changing customer demands and it solves the problems that your customer is having.
Challenges In Diversifying
Apart from the factors mentioned, it is also essential to acknowledge and prepare a plan for the challenges that comes in together with diversifying your business.
To know when is the right time to diversify is critical and certainly tricky to know for sure. If the move is increasingly relevant for your customers, it might be the right time to enter into the market.
Conclusion
Diversifying your business is not a small matter: it can make or break your company for good. But that said, the payoff is certainly big, and when done correctly, you can be sure that the decision push your company into the right direction.
Do you as the business owner ever consider this move sometime in the future?
