Business leaders need to be ready for anything. The pandemic shakeup affected businesses differently. There were record performances, unexpected failures, as well as companies acquiring struggling businesses and business leaders cashing in the chips. One lesson that seems applicable to everyone is the importance of having options.
There’s a tendency by some business leaders to be reactive rather than proactive, taking what the market gives rather than being more deliberate, building up capabilities and seizing on opportunities that they discover through research and planning.
One way to be ready to seize on opportunities is by running a diversified operation. Many companies have one innovation or strength that stands out in the market. While that may work for a while — especially for disruptors, such as early Microsoft, that are able to create a significant moat — competition eventually catches up. What’s worse, though, is if the market takes a turn and the company’s one niche or innovation falls out of favor. That can sometimes mean the end of the company. (Video rental businesses, such as Blockbuster, come to mind).
The importance of diversification is a lesson learned and practiced by some of the country’s biggest companies. Disney, for example, began as an animator, creating groundbreaking and hugely successful films. The company, however, found itself in debt as the high cost of production eclipsed the relatively low margins. So, Disney diversified. It set up a distribution company that produced higher-margin nature documentaries and sold a television series to ABC, the proceeds from which were invested into Disneyland, another point of diversification, and a venture that helped the company become wildly successful.
Another example is Apple. Today the world’s most valuable company, it was on the brink of bankruptcy in 1990 when its personal computers shed market share to more affordable versions that ran on the Microsoft Windows operating system. It was the successive launches of the iMac, iPod, iPhone and iPad at the start of the new millennium that resuscitated the company, leading it to become the first publicly traded company to be valued at over $1 trillion.
Consider where your business is at today. What happens if your top-selling service or product suddenly falls out of favor in the market? Your company may be prepared for this, but if it’s not, regroup, take inventory of your organizational strengths and weaknesses, research the market to find opportunities that align with those strengths, and reposition yourself. It takes a lot of effort to retool an organization, and doing so is not without risk, but the payoff could be transformative.
Fred Koury is President and CEO of Smart Business Network Inc.