WE ALL REMEMBER learning about the importance of diversification and how it most commonly balances an individual or business’ risk/reward. Although this may be true, be sure you, or your business, are not taking this too far. It is easy to only read the proverbial bold print of this principle and assume that lots of different things going on at the store, in the office, or in the portfolio, are good things. Not exactly--sometimes, it can actually be detrimental to the success of a person or business.
This happens when these individuals or businesses attempt to have their hands in too many cookie jars at one time. It seems like a good idea at first, but it soon becomes a situation where nothing ever gets done and there are a lot of great ideas being thrown around in equal excitement. The problem with this usually shows up when it comes time to implement these wonderful plans and ideas. The bottom line is that individuals and small businesses can only take action on so much. The common result is that when companies try to take on too much at one time, they leave the wheels spinning, but nothing ever gets anywhere.
For individuals, the idea is simple: It’s great to be involved in multiple initiatives, even if it’s at the same time. Just ensure that you can successfully execute on all fronts and manage your time to allow for productivity to take place with each project. If you find yourself laying in bed wondering what you accomplished today, because although you were busy, you are now exhausted and you feel worked to the bone, but you can’t quite put your finger on what you got off your plate, then it is official: you have yourself spread way too thin and it’s only a matter of time before you burn out and your endeavors fail due to lack of progress.
Be willing to grade yourself and decide if what you are managing on a daily basis is too much. Be busy, be effective, and be productive, just don’t chase your tail ‘sun up’ to ‘sun down’.
Businesses suffer from the misuse of this principle, too: The sports bar trying to have a wine selection, the Chinese restaurants that sell cheeseburgers, etc. Believe it or not, there are a ton of businesses that sell too many different things and they clearly don’t know or remember why people patronize their establishment, anyway. I don’t go to the car dealership to buy collared shirts, nor do I go to the mall to get a massage at a kiosk. I can’t imagine that a car dealership makes a huge bottom line impact by selling nostalgic shirts, compared to the $75 per hour in shop labor, the 35% markup on items from the parts department, and the $100-1500 preventative services every 3,000-15,000 miles.
Not unlike individuals, businesses may have multiple verticals that generate revenue; however, the successful ones are in some way related. (e.g. the cable company offers not only cable, but telephone service, internet and a few other add-ons). This model works because all these services are related.
Not to rely heavily on the car dealership example, but again, they have three primary verticals: vehicle sales (new and used), vehicle service, and parts. Sounds logical, right? It’s amazing how many businesses attempt to compete in industries that are unrelated. Just remember all of the other areas of business that can be consolidated by maintaining some level of continuity between products and services. The company can operate with one image, use one website, the products or services in question can share marketing materials and sales collateral.
Also, don’t forget the consolidated marketing efforts. Imagine, the more unrelated verticals a business has, the more marketing lists that need to be created or purchased, the more tradeshows and conventions that need to be attended, the exponentially more mailers that need to be sent out and the additional trade journals and magazines that advertisements need to be placed in. This could go on forever, but I’m sure you get the point. Eventually, businesses reach a point of diminishing returns. This simply means that it’s not worth all the effort and additional expense for the eventual bump in the bottom line--if there even is one.
Don’t spread yourself too thin and don’t forget where you came from, what your good at, and why your customers patronize your establishment. Remember these fundamental things and you and your business should do just fine.