Diversification involves entering new markets or launching new products. However, it can be risky if it takes too much time and resources from your core offering. But if new market opportunities are researched well they can be exploited to create significant growth and even minimize the risk associated with depending on one revenue stream.
Many of the most successful diversification strategies use the business’ core skills to launch new, complementary services; however, the individual diversification strategy of a particular businesses will depend upon a thorough knowledge and assessment of the market, economic situation, and the business’ existing skills and resources.
Target other markets
When you first started your business you’ll probably have carried out lots of market research and defined a specific market segment to target. As most businesses understand, it’s usually very difficult and ineffective to attempt to target every possible customer.
Therefore, if you’re now considering targeting other markets, you should approach this decision in just the same way. Carry out market research, establish whether and where untapped customer demand exists, and look at whether any particular segments are being targeted or ignored by your competitors. Combined with your business knowledge and experience, this information will enable you to decide whether it’s likely to be profitable to target other markets, and if so, which ones.
Innovating products or services
This depends on where you’re aiming to take your business and how much you’ve already achieved. It also depends on what your customers are demanding and what your competitors are doing.
Innovation can help your business to grow. However, it requires investment and is not without its risks. The first thing to consider, therefore, is the financial condition of your business and how much investment you’re able or willing to put on the line.
Before making a decision to innovate, it’s also important to carry out thorough market research. There is little point developing a new product if there are no customers willing to buy it, and if your rivals are already innovating in one direction you might choose to take another path.