More than 100 U.S. healthcare organizations, including hospitals, clinics, rehabilitation centers, elder care facilities, home care facilities and physical therapy centers are already participating in Uber’s beta program, called Uber Health. The news prompts us to ask ourselves the following question: it is clear that diversifying a company’s activities and lines of business can be a good growth strategy… but to manage this process well, you need to take a number of basic precautions.
No matter which path you choose, that’s what practice says There are a number of factors on which the success of diversification largely depends. Namely:
1. Better, the familiar. Every industry has its own work processes, customers, marketing systems… For this reason, an unwritten rule says that we should only expand into activities that are familiar to us. As every rule has its exceptions, business angel Carlos Blanco recalls the precedent set by François Derbaix, founder of TopRural.com, “Leader in country houses in Spain and who had never stayed in a country house”. However, he himself admits that specific experience “helps to become faster and make fewer mistakes”.
2. Offer complementary products. Although your activities are unrelated, you should at least focus on a similar audience. For example, a travel agency and a bookstore specializing in globetrotters represent two completely different business models, but they target the same type of customer. This is how the people in charge at De Viaje, who have been working according to this formula for 21 years, saw it.
3. “Because you asked for it”. Listening to customers, partners and suppliers is always another good piece of advice to spot new opportunities.
4. Ask those who understand. In a period of transition for their company, the family of winemakers Dinastía Vivanco decided to use their large collection of pieces and machines related to wine to create a museum about this world on their land. Realizing they had entered a new business field, tourism, they turned to Deloitte for advice, who advised them on the feasibility of the project, staffing needs, etc. As general advice, if you spot a niche that might be your opportunity but your knowledge of it is weak, don’t hesitate to ask for help before learning the hard way.
What’s at stake when you enter a new market niche?
This is by no means a safe bet: a poorly designed diversification strategy could end up hurting the original activity…
Start new areas of activity, enter industries we have never worked in before… In addition to potential benefits, All of this comes with a number of risks that you should be aware of before you get to work. Here are some of them.
1. Burn your brand. Business strategy expert Vicente Dávila warns that our brand can lose value “through excessive use in very different topics and products”. If the activities you will be tackling are unrelated, avoid this disposition by using different ad banners for each activity.
2. Neglect the original business. This is the worst thing that can happen to you. A new and different activity will take more hours than you would like. Avoid having that time initially at the expense of your company, or, as investor Carlos Blanco comments, hand off the management of that project or company to another leader “with enough weight as a partner that he’s really motivated”.
3. Rising expenses. If the new niche requires assets (even if they’re just specialized vendors or employees), you can almost certainly expect the cost to be higher than originally anticipated. The greatest risk in this case is that the new project will end up continuing at the expense of the original company. If at any point you find you can get to that point, it’s better to disconnect than sacrifice two projects for the failures of one.
4. Discover that it’s different than you thought. The advice would be not to be guilty of vanity and think that because you are an expert in a business, nothing else can be too complicated for you. Suddenly finding yourself with a different management model, different types of suppliers, partners and employees, or with a client who doesn’t respond to the same commercial stimuli are just some of the difficulties that can arise.