Growing a Business #3: Diversification

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In the third and final instalment of our series on Growing a Business in April – we’re focussing on diversification – widening the range of products or services you offer to increase your sales and customer base. It’s a great way of expanding a business, particularly if you’ve got an existing set of customers who might find your new offerings are just what they need.

But knowing when to diversify and what to diversify in can be a tricky skill. Technological development and disruption over the past 20 years has seen the rise of some huge tech brands and the obliteration of others. So let’s take a look at diversification and give you some pointers as to how to approach it…

Former Mobile Phone Giant Nokia wasn’t a phone company originally. In fact, it has been around since 1865 – 11 years before Alexander Graham Bell had his lightbulb moment with the Telephone. It was founded as a pulp mill company, but over the next 100 years diversified into all sorts of complimenting businesses – including Forestry, Power generation and Rubber Manufacture. It wasn’t until the late 1960s that all the different arms of the company merged to create Nokia Corporation. It wasn’t until the late 1970s that the electronics division got into the swing of mobile telecommunications, and that grew through the 19080s to make Nokia the market leader through the 1990s and early noughties.

Nokia Phone’s demise was rapid from 2007. And was (to a big extent) a result of another tech company – Apple’s – diversification. In 1996 the American tech company was reportedly 5 days from bankruptcy. The return of founder Steve Jobs and innovative new ‘i’ products saw it survive and grow into the 2000s – but 2007 was the company’s game changer year as they diversified into the telecommunications sector – and introduced the iPhone.

Don’t worry about Nokia though – the other part of their business is the Telecommunications Infrastructure on which movie phones operate, which is alive and well!  The handset side of the business was bought by Microsoft to enable them to develop Apple rivalling handsets. Besides – in a licensing deal they’ve just launched the retro 3310 in an attempt to capture a niche market trend for ‘dumbphones’ – a diversification in itself.

The key point is that diversification can be a risky business – but so can being oblivious to technological and cultural change.

The potential for diversification in your business might seem limited – or you may have spotted a brilliant gap in the market. So how do you go about diversifying without betting the security of the existing business? Well that does down to market research and instinct…

Gut Instinct

Sometimes you just know that something is right. If you’ve made a success in business and your gut instinct is telling you that you can take another step in a particular direction then it’s probably a decent bet. If you’re needing to commit a lot of resources though, it might be best to

Customer feedback

First off, your customers are a great source of information when it comes to diversifying. Get talking to them. They might inadvertently suggest a great new direction or tell you of a product you could be offering. There are loads of ways of doing this – face-to-face, with an email questionnaire, or over the telephone. You can incentivise it with a prize draw or reward of some description.

Start Small, Testing 1-2-3

If you’re buying stock or introducing a new service, you can offer it to a small group of customers as a limited offer or discounted rate. That’ll allow you to gauge demand and see if your new offering has a market. Of course, buying that stock in will require some investment, as will the marketing collateral to promote it.

Space

If your new line takes up physical space, you’ll need somewhere to keep it. If your existing premises are too busy providing room for your existing established business activities, you might need to find more room. One way of doing that is to get yourself a storage unit. It’s lower risk – especially if you store with us in Wandsworth – because you’ll only pay for the days you’re using the unit. So if your new products scream off the shelves in 3 days, that’s all you’ll pay for in store costs. If they take little longer – and perhaps you’d like to downsize your unit – you can move to a smaller one with littler notice.  It’s a great way of keeping storage costs to a minimum. Find out more about our business storage options on our main website.

 

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