Business Management - How to diversify your business

Building on core competencies and tapping into customers' trust are the secret to a successful move into different areas for companies looking to hedge against market fluctuations, Leslie Kossoff contends.

Time was that being expert in a speciality area was the best way to succeed. Not any more and not going forward.

The reason is because customers need and are looking for full-scale, one-stop-shop solutions. Public or private sector, the more they can simplify by centralising services with one, more generalist provider, the better the value they will receive.

What that means is the more you look at building on what you already know best, the faster you can determine how you become that single solution. And that means diversifying.

Expanded contexts

The easiest way to determine how to diversify is by looking at what you do in any other context than the one in which you do it.

Take Robin Tacchi Plants. When the company debuted and began its test-marketing at the Four Oaks Trade Show last year (HW, 20 August 2010), it was because it recognised that the amenity market was too limited for its purposes. It was time to diversify. It wanted to see how it could use what it does so well to sell product into a different part of the market altogether - garden retail.

The company didn't give up on growing nor did it take a "sit back and wait" attitude until the building industry numbers improve on new home build. It took what it does and figured out how to make it as valuable to a different audience as to its first.

That's the important thing about diversification. There tends to be a mistaken belief that diversification means leaving your first market. It doesn't. It means finding ways to build on your core competencies so that what you do is profitable in more than one market.

Which leads us to what customers really want and how to use your core competencies to provide it.

What customers want

Customers are looking for providers they can trust - suppliers who will do the work necessary and do it well, consistently and at a fair price point. Very simply, they are looking for solutions to problems that they won't have to revisit because the decision they made solves their problem ... forever.

You already have that - even if you are entering into a new market. You have all the credibility you have built up with your previous clients. That credibility, contrary to your thinking, translates in your new customers' eyes into a provider they can trust. Yes, even if you don't have a track record in doing all that they are asking.

Don't let anyone tell you - and don't tell yourself - that your knowledge, skill and experience is not transferable. More importantly, don't ever believe that just because you've not applied what you do to a new arena that either you can't or customers won't buy it from you.

You'll be wrong and you will have missed major opportunities that continue to arise. That takes us directly to how you see and use your core competencies to succeed.

The core competencies

Interestingly, in customers' eyes, a grower is a grower and a landscaper is a landscaper. You see yourself as a specialist in a sea of other specialists and generalists, but they don't. They see you as a generalist who decided to specialise - and that's your way in.

Working with the premise that you are already a trusted provider because of all the credibility you've previously established - and don't forget to ask your past and present customers for commendations - the next set of questions, with a little bit of guidance, you ask yourself are:

- At its core, what do we do? For example: Do we grow? Do we maintain? Do we design?

- How do we specialise? In effect: Within what specific parameters or limitations have we positioned ourselves?

- What business lines (product or service) have we removed from or never included in our offering?

- Must those lines remain outside our offerings?

- If so, which and why? And how do we know? This can't be emotional or historical. It has to be data driven.

- How can we expand on what we do without losing our current markets?

- What will it take in time and investment to get there?

Those questions get you through the first level of analysis which will lead you to identifying, in general, your opportunities. The next set of questions addresses and plans for current customer support and development:

- What are the opportunities to sell our new, diversified lines to our current clients?

- Whether they buy or not, how do we assure our current clients that there are no risks involved and only new opportunities to help?

- How will we know whether to continue investing in those current markets as our diversified business takes off?

Because the next step is looking at where your new market opportunities lie. The questions toward that goal are:

- Given our broader definition of who we are and what we can do: Who is currently selling into that market? How do they differentiate themselves? What limitations have they put on their offering? How do we establish ourselves - with their customers - as a preferred provider of the products and services those competitors are currently providing? See my article on pitching for new business (HW, 18 March).

Markets are only as limited as you make them. Diversification takes those limits away.

Leslie L Kossoff is the author of Leadership Quantified - see www.leadershipquantified.com


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