Specialization versus Diversification in Business – a 2 step approach
Shall we evolve or keep the business as it is for a long time?
This is a question we have easily answered along the past 6 years, without a shadow of a
doubt, but… (and sometimes “but” appears to my mind, and to yours too, I’m sure) this year we wanted to introduce new business areas for the next fiscal and some did not seem as being part of our specialization: Strategy and Visual Communication!
So, what needs to be done? We need to carefully understand what can be part of our core business and what cannot so we keep only the valid options (or almost valid at that first step).
We were offered some partnerships for potentially interesting services as well as the distribution of some nice products that did not fit our mission and were miles away from our core, so we had to discard them.
Now we just have some options – new business lines – that may fit our core business if, and some only if, we can adapt their communication to the market. And that’s fundamental (and it is our second step). Sometimes the package is as important as, or more than, the product, or service in our case!
If you are not sure about the difference, seeking for these two variables (specialization and diversification) in the dictionary may help a lot.
“Specialization in an economic sense refers to individuals and organizations focusing on the limited range of production tasks they perform best” (Hall, 2009), or, “The act of specializing; making something suitable for a special purpose” (thefreedictionary.com, n.d.)
Diversification is “A risk-reduction strategy that involves adding a product, services, location, customers and markets to your company’s portfolio” (Hall and Lee, 1993), or “the act or practice of manufacturing a variety of products, investing in a variety of securities, selling a variety of merchandise, etc., so that a failure in or an economic slump affecting one of them will not be disastrous.” (dictionary.com).
We are specialized in Strategy and Visual Communication (we offer innovation strategy services based on Design Thinking, training on several areas always taking advantage of Visuals, we produce live Graphic Recording, we do Visual Facilitation, we are in the Video Production, we use Mind Maps and we sell some products related to visuals and visual arts) so, for this year, we decided to simply add new business lines that fit our specialization: a small Graphic Design area and an entirely new approach to Digital Signage and Corporate TV.
What do you think? Are we adding valid diversification options considering our specialization? We think so!
Now you know what we’ve done, the care we add to put in doing it and that we throw away some potentially good opportunities, simply because they’ll distract us and will reduce our focus from what is our core and specialization.
And don’t forget to get the best people to cover all the missing resources!
Want to know more? Look for UpSideUp.pt and check what is going to happen over the next months!
Daniel Lança Perdigão, Strategist & Visual Thinker, UpSideUp.pt