I walked into a large whitegoods retailer before Easter to buy a new DVD player. We still had a player at home that needed updating because it didn’t have Blu-ray capabilities. What should have been a relatively easy process turned into a major shopping expedition. I did what 86 percent of consumers in Australia do and participated in some ‘webrooming’ before I ventured out of my house. I researched various models online and had an idea of the product I wanted to buy when I entered the store. I was happy to take some additional advice from the experts at the retailer that I chose to visit to ensure I bought the right product.
My first mistake was assuming I would be able to speak with an expert. Actually, I made another mistake before this mistake: I had an open mind towards which model to buy when I entered the store. Life is easy with hindsight but I should have made a decision before I walked in.
In the store, I walked for several hours to find the players. I was confronted by an array of choices stretching as far as the eye could see. So I asked the salesperson for information; I quickly realised that my 10 minutes of webrooming had made me more of an expert than this ‘expert’ salesperson.
I asked why I should buy which product; I asked for his recommendations; I even told him what I thought was the best product for me. Turns out the most I would receive was to have the salesperson read the specs from the label.
After speaking with several salespeople with similar results I started thinking about the concept of diversification. A business often diversifies in order to increase profits – the number one aim of every business – and also to spread risk. Many tobacconists move into novelty coffee mugs and football-branded items as a way of reducing the risk of selling into a declining market.
The major issue with diversification though – in particular in such a technical and fast-moving industry as IT – is that it is easy to diversify to the point of suffering from what I call ‘The Goodies’ syndrome. The BBC comedy from the 1970s had the motto, “We do anything, anytime, anywhere”, which usually resulted in them dealing with some bizarre situations. Some businesses believe the way to increase profits is to sell anything, anytime to anyone and hence lose sight of their core focus.
So is it a case of, “To diversify or not to diversify, that is the question”? Ongoing development of your business means there will always be a level of diversification. But how much? Diversify too far and you lose sight of your core. Don’t diversify enough and you increase your business risk on a single area of focus.
Diversification is not to be confused with evolution. Just because your business looks different today to how it did yesterday doesn’t necessarily mean you have diversified.
Tell me if you prefer to stay with only your core focus or you think diversification is the answer to future profits at email@example.com
Case study: Auslaser
Beata Koropatwa from Auslaser knows a bit about diversification. A lawyer by trade, she has now been in the IT industry for 21 years. Auslaser started out as an office supplies company but has diversified into a number of technology areas. “We originally had a very good business in consumables but that market started diminishing when OEM suppliers started selling direct to clients so we had to change our business quickly,” says Beata.
Auslaser has a number of areas under the one umbrella, from SaaS to business intelligence through to e-learning. It even has an IT recruitment firm that started by direct request. “When we became involved in BI solutions, some of our clients were impressed with the quality of the staff involved in their projects. They asked if we could hire out some of our staff to their firm and Auslaser People Solutions grew organically from there.”
Beata’s secret is that you need to have a strong business relationship with your clients and listen intently to their needs and then provide them with solutions.
Matthew Dickerson is a technology professional who has started a total of six small businesses