I spend my summers on the coast of northern Maine where the tide fluctuates by some eighteen feet from ebb to high. The perpetual shifting tides are analogous to the challenges facing CEOs. Change is constant, but it’s not always visible to the naked eye. Unlike the ocean, however, the change we are experiencing, in business or personally, is one of evolution, not repetition; it is in constant motion in a multitude of directions.
If you want to grow your business, exercising prudent judgment regarding market shifts and opportunities may be sufficient for initial growth and short-term success. For instance, you may be in a niche market protected from outside influences. Or your core sales may continue to evolve in their upward spiral. However, these growth scenarios are unlikely to last forever.
As the saying goes, “Before the river starts running dry, look for water elsewhere.”
Assuming your goal is long-term growth—and assuming you have the drive, financial resources, and will to accept the time and risks involved—then diversification can become your bedfellow.
There are many avenues available for diversification. They include facilities, personnel, equipment, processes, and particularly, markets. Three forms of diversification stand out: market development, product development, and pure diversification. How you choose to make configurations out of these forms of diversification, separately and in combination, is key to your success.
So where do you stand regarding the strategy of diversification?
- Reactive: You are mildly curious and open to possibilities should such opportunities cross your business threshold.
- Forward Thinking: You recognize the need to expand into new areas if you are to continue to build revenue.
- Pro-Active: You may already be seeking ways of growing in new directions.
The precursor to success in diversification, as is true in most any venture of substance, is preparation. Take football, for example. Bill Belichick, coach of the New England Patriots (and one of the most successful coaches of all time) is a meticulous preparer. He plans not only for this season (and next) but also plans, very thoroughly, for every individual game. The better your preparation, the more likely you are to optimize your success.
Let’s return to the issue of growth. Why grow your business? Why not just continue as is? After all, you may control or possess an established company generating a sustainable income. Cutting to the chase, I identify three basic scenarios facing you and your business: growth, decline, and status quo. In actuality, status quo can only be captured for but an instant—like a photograph. Thus, ultimately, you either grow or decline.
We are strongly influenced by the marketplace in which our business functions. This marketplace is constantly evolving—shifting with the sands and tides of time. In what way is your marketing maturing? By paying close attention to the rise and fall of the tides of your market, you can best prepare yourself, and your business, for new opportunities that require new methods of navigation—diversification in markets, products, and branding.
As the noted columnist and author, Thomas Friedman, states in his most recent best-selling book, Thank You For Being Late, the three largest forces on the planet—technology, globalization, and climate change—are currently all accelerating at once. This creates an unprecedented rate of change for us all, in our business and personal lives. We often find it hard to keep up!
Here are seven categories of change that affect each and every one of us on an evolving basis—some slowly, some on a daily basis:
- Population Movement. Note emigration from strife-torn Near Eastern countries. We can readily observe the growth of other races in our local population mix—more noticeable, perhaps, in the eastern, southern, and western coastal regions of this country.
- National Boundaries. A recent example is Britain opting to leave the confines of the European Union (Brexit).
- Buying Trends. The switch to the Internet and subsequent e-commerce is having a profound impact on our lives in a multitude of ways.
- Market Evolution. Changes are constantly occurring in every industry. Are you aware of them?
- Product Innovation. Is a blockbuster product under development or has it recently been introduced by you or your competition?
- Family Dynamics. We are all subject to them as we age. What are yours?
- Personal Interests. We too change—besides aging, our interests, energy level, and habits shift, as do those of our family.
The volatility of the marketplace is most prevalent and observable in the consumer field, but it also impacts the industrial market. Look at the energy industry. With the development of shale drilling for oil, it appeared that the United States would be exporting (rather than importing) oil in large quantities. But other countries latched onto this technology, and Near Eastern countries expanded their supply. Soon we had an oil glut, which is noticeable today. Its impact has been felt in many industries, including oil producers, rail transportation, and energy consumption practices.
Emerging in the field of energy are the natural forces of sun and wind. As collection sources become less expensive and as storage devices (i.e. batteries) become more efficient, we can soon expect to see a lessening of our dependence on fossil fuels like oil.
As Mike Nolan, vice chair of innovation and enterprise solutions at KPMG, LLP, recently was quoted in The Wall Street Journal, “The pace of change today can be blinding. Business model transformations that once took ten to twenty years are now happening in as few as two to five. To stay competitive, leaders of innovative companies must be prepared to act before they are beaten to the punch by smaller, nimbler, and sometimes invisible rivals.”
Regardless of whether you are reactive, forward thinking, or even pro-active, preparing for diversification is the prerequisite to diversification itself. By paying close attention to the seven categories of change, you can see new opportunities before competitors can. Just as the market rises and falls like the tide, diversification itself is changing, constantly evolving with new opportunities for those that know to adapt with it.
This article is an excerpt from Brooks Fenno’s latest book, Corporate Diversification (Archway Publishing, 2018) and is reprinted with permission.