Blog: Diversification is the Art of Long-term Sustainability
Every company in every sector has to diversify its offering to be competitive and offer continuous value for money and innovation to its client base. This statement has never been truer than within our sector in recent years. With the continued march of margin challenge, increased legislative costs, the pressure on resourcing our teams, and the current political situation causing delayed investment decisions, businesses need to have the long-term approach in mind with continued investment in new services and products keeping relevant to changing tastes.
There are numerous challenges in diversification but one of the biggest can be the impact on the core business. Investing in new areas (the Incubation Zone) takes significant time, focus and resourcing while continuing to support the core business and focus on delivery can be tricky. Not allocating as much cash to core areas can cause internal discontent and ‘them and us’ scenarios.
The key is to be up front about the reasoning of your plans and why it is crucial for the whole business to be successful in new areas, sharing your vision of the future shape of the business. Today’s P&L makeup will be a lot different in 3 years to 5 years, to the greater benefit of all. It’s also vital to work with partners and look at the alternatives; working with better placed partners who can support your strategic approach to offer clients more options to purchase. It can be a failure of some companies that they attempt to diversify and do everything through their own business trying to keep control – this, in my view, is a mistake. It can actually be more cost effective and beneficial for the client to work directly with a partner. In my experience, an approach merging the two options of start-up and partnering is the best way forward. Having some incubator start-up business units in your portfolio with long-term benefits, whilst working with partners in other sectors or services which strategically move you forward.
Businesses need to be bold and believe in their long-term plans. This does mean taking calculated risks, but there is one thing for sure; the business who sits and waits for opportunity to be perfect will never reach its potential and will always be behind the curve of innovation and market capture.