History
is laden with examples of businesses that have broadened their repertoire of
products and services, yielding both remarkable successes and monumental
failures. On the other hand, there is really no such thing as “playing it
safe.” Just as many companies have foundered by deviating too far, too fast
from their traditional business model, others have lost their edge by hewing
too closely to convention, like old dogs that failed to learn new tricks. A
famous example of the latter is Smith-Corona, which by the 1980s had firmly
established itself as the world’s premier manufacturer of typewriters, only to
watch its signal technology fade into obsolescence due to the advancement of
the personal computer.
Of
course, the prospect of expanding a business model is daunting, and the
temptation of risk-aversion is strong. But the choice to “stick with the core”
entails its own risks. There are no guarantees. But there are strategies
companies can employ that will enhance the probability of a successful
transition or expansion.
Assess
your current capabilities. Where does your business excel? What can you do
better?
If
you’re running a profitable business already, it’s a sign that your clientele
values what you have to offer. Take the time to realistically determine your
strengths and weaknesses as an organization, and where they stack up against
your major competitors. Equally important, stay abreast of any new techniques,
technologies, and business opportunities that your competitors may be
exploring.
In
his influential book Understanding Media,
cultural analyst Marshall McLuhan advanced the thesis that technology—including
tools, vehicles, and furniture (which he broadly defines as “media”)—are effective
extensions of the human body and mind, geared toward a particular purpose.
Using this concept as a framework for analysis, we can infer that a successful
transition from one medium to another requires organizations to first recognize
a distinction between what they provide, and the means (media) by which they
provide it.
For
example, the best restaurants are not exclusively in the business of serving
food; they afford customers a social, environmental, and gastronomic
experience. The technology corporation IBM is not merely a manufacturer of
computers and software; its primary purpose is to facilitate the storage and
transfer of vast amounts of information. Computers are a medium which serves
that end.
Think
about the primary purpose of your business, and the experience you would like
your customers to have. Are there easier, more efficient, or more
cost-effective ways to achieve that goal? What are the tools, or media, at your
disposal?
Seek out
windows of opportunity.
Once
you have a clear idea of the raison
d’ĂȘtre of your business, you can think about broadening the range of
products and services on offer. Amazon, which began as an online book retailer,
now distributes DVDs, music, and even fashion accessories. Netflix, once a
mail-order DVD rental service that came close to bankruptcy, is now a highly
profitable video-on-demand website with an increasingly global customer base.
Both companies recognized that they were in the business not only of moving
product, but of catering to the lifestyles of busy professionals by providing
easy, convenient gateways for shopping and entertainment.
Do your
research first.
Occasionally,
the opportunity to open up a niche or neglected market presents itself, if you
are fortunate or imaginative enough to find prospective customers who are
underserved, or to devise a technique that hasn’t been tried yet. But in most
transitions or expansions to new markets, you’ll find an established group of
firms with a strong foothold. Invariably, those competitors will tenaciously
resist your attempts to siphon away their clientele, and will have the
advantages of experience, skill, infrastructure, existing relationships, and
inside knowledge on their side.
This
is why advance research is so important. Before you embark upon a new
endeavour, survey the terrain. Get to know your prospective customers and their
needs and habits. Identify and examine the most prominent incumbents in the
industry, and understand why they are successful.
If
you’ve done your homework, feel confident that you can offer a better deal than
what’s already on the table in your target market, have a viable business plan,
and have secured the capital and cash flow you need, then you’re ready to make
a move.
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