Posted on 19th August, 2015
Posted on 19th August, 2015
by Simon Woodward
Expert guide: Smart diversification
Google has been committed to diversification over the past few years, exploring many opportunities that can add to the success of its search-based advertising business. Monday’s announcement that Google is creating a new parent company called Alphabet demonstrates the need for companies to continuously evolve.
All businesses need to be prepared to evolve. While your focus should inevitably be on maximising your core proposition you should always be open to new opportunities and new applications for your product or service.
For startups, diversifying can be a particularly tricky route to navigate. How do you turn an opportunity into a new, profitable, revenue stream, without neglecting your core profit-generating offering?
Laying the foundations
It’s easy to get caught up in the excitement of diversification, especially when a company is young and finding its feet. From experience, it’s crucial at this point to map out your company’s strengths and to identify where you can continue to grow your core business. Once this is clearly understood you can begin to assess where there are potential opportunities to develop and market additional offerings.
To support diversification you need to maintain a focus on driving the momentum of your core proposition so that you’re able to explore new opportunities without impacting core business. At Feonic for example, we have a very strong position in the audio market for our patented invisible speaker technology. We have and are continuing to protect this leadership position by partnering with global media companies, resellers and various other agencies that are able to sell our technology into their client bases, ensuring we have a healthy customer pipeline.
Exploring new opportunities
In the context of a well understood and executed core business strategy, you can begin to identify and explore new opportunities. For start-ups in particular, these opportunities must be carefully managed. At Feonic we are currently diversifying our technology to be used in areas outside of the traditional speaker use cases, primarily in the noise reduction, energy harvesting and digital signage markets. To get to the point where we can exploit these new areas, we evaluated the following:
- Into which markets that we haven’t entered yet, do we think our products could deliver significant, differentiated value?
- What do we need to do to progress the development of these opportunities?
- How much resource (both financial and human) will be required to develop these new opportunities?
- Will external investment be required to progress these opportunities or can existing working capital be reallocated?
- What processes are required to ensure that new opportunities do not destabilise the core business?
Turning a bright idea into reality
Diversification is a key strategy in many successful growth companies. However, you need to maintain a smart, cohesive approach to your whole business during this time. Whether it’s ensuring appropriate skills are deployed, implementing the necessary sales and marketing plans or bringing your website in-line with the necessary market positioning. You must clearly communicate to the new target markets, as well as existing target markets, the benefits of your product range.
Find out where your products are already being used ‘off-label’ and leverage reference materials such as case studies and customer testimonials to build credibility in those areas. For example, in the noise cancellation space, Feonic has a great example of how our technology was used to reduce unwanted sound from a noisy manufacturing plant close to a retirement home, making it much more peaceful for the residents. Use cases like this are an excellent way to support the building of credibility in new markets and instilling confidence that your secondary markets are as fully formed as your primary use-cases.
Exploited effectively and managed well, diversification doesn’t need to be risky; it can be both exciting and very financially rewarding.
Feonic is currently raising funds to support its business growth via sophisticated investment platform, VentureFounders. To find out more about the opportunity to invest, visit: http://www.venturefounders.co.uk/opportunities/feonic. Capital at risk.