Why Diversifying Your Small Business Can Be a Great Growth Strategy
CEO Simon Woodward looks at the key considerations and steps companies should take when chasing new business opportunities
All businesses need to be prepared to evolve. While your focus should inevitably be on maximising your core proposition you should always be open to new opportunities and new applications for your product or service.
Google has been committed to diversification over the past few years, exploring many opportunities that can add to the success of its search-based advertising business. The recent announcement that Google is creating a new parent company called Alphabet demonstrates the need for companies to continuously evolve.
For small businesses, diversifying can be a particularly tricky route to navigate. How do you turn an opportunity into a new, profitable, revenue stream, without neglecting your core, profit-generating offering?
Lay your business’ foundations
It’s easy to get caught up in the excitement of diversification, especially when a company is young and finding its feet. From experience, it’s crucial at this point to map out your company’s strengths and to identify where you can continue to grow your core business. Once this is clearly understood you can begin to assess where there are potential opportunities to develop and market additional offerings.
To support diversification you need to maintain a focus on driving the momentum of your core proposition so that you’re able to explore new opportunities without impacting core business.
Do your research: Explore new opportunities
In the context of a well understood and executed core business strategy, you can begin to identify and explore new opportunities. For small businesses in particular, these opportunities must be carefully managed. At my company we are currently diversifying our technology to be used in areas outside of the traditional speaker use cases, primarily in the noise reduction, energy harvesting and digital signage markets. To get to the point where we can exploit these new areas, we evaluated the following:
- What untouched markets do we think our products could deliver significant, differentiated value in?
- What do we need to do to progress the development of these opportunities?
- How much resource (both financial and human) will be required to develop these new opportunities?
- Will external investment be required to progress these opportunities or can existing working capital be reallocated?
- What processes are required to ensure that new opportunities do not destabilise the core business?
Turning your bright business idea into reality
Diversification is a key strategy in many successful growth companies. However, you need to maintain a smart, cohesive approach to your whole business during this time. Whether it’s ensuring appropriate skills are deployed, implementing the necessary sales and marketing plans or bringing your website in-line with the necessary market positioning. You must clearly communicate to the new target markets, as well as existing target markets, the benefits of your product range.
Find out where your products are already being used ‘off-label’ and leverage reference materials such as case studies and customer testimonials to build credibility in those areas. For example, my business uses a great example of how our technology was used to reduce unwanted sound from a noisy manufacturing plant close to a retirement home. Case studies like this are an excellent way to support building credibility in new markets and to instill confidence that your secondary markets are as fully formed as your primary use-cases.
Exploited effectively and managed well, diversification doesn’t need to be risky; it can be both exciting and very financially rewarding…
This blog was contribued by Simon Woodward, CEO of sound technology business Feonic.