ORGANISATIONAL STEPS TO DIVERSIFICATION
Sometimes, opportunities come at just the right time and the business man is ready and quick to snatch them up. Other times, and this is more common, opportunities are sought and integrated as structured steps in an organisation’s strategic business plan. A planned move is always more likely to succeed than a hastily grabbed opportunity. As was enumerated in the last article, there are certain conditions that have to be right before an organisation should plan to diversify. A business with a weak financial health, core business instability, limited management capacity, inadequate resources and the absence of a strategic plan is clearly unfit to handle diversification at the moment.
Just for clarity, by diversification, we refer to a deliberate move by a business to expand its products, services or markets to enhance growth opportunities. Diversification is like charting a course through strange waters, therefore the CEO ought to be absolutely sure that his main business is strong enough, in terms of financial and human resources, to support a new business. There are many companies that have fizzled out because their management diversified prematurely.
This article is a guide to entrepreneurs that have built a solid and dependable business and are ready to branch out into other areas. Below are some basic and necessary initial steps to take to ensure a smooth and successful diversification.
Conduct a Thorough Market Research
A market research will help the business owner to search for and discover potential opportunities for diversification – identify target customer segments and their needs, analyze industry trends, market size and growth potential, and competitive landscapes to find viable markets or products. A market research will also evaluate demand for the new product/service and assess potential risks. It is necessary to study competitors and their unique strategies. This will help the company to know what works and what does not, where the pitfalls are and also assist them to formulate unique qualities that will quick appropriation of the market share.
Evaluate Core Competencies
Once the market research has been concluded successfully, it is expected that the organisation has a clear idea of the best possible course to take in this new venture. The next step is to conduct an internal audit to evaluate the company’s strengths and how they can be leveraged in the new venture. The entrepreneur should list the organisational strengths like great brand reputation, efficient human resources, strong funding base, technological edge (where applicable), strong market presence etc. Determine how these areas of competence can leverage the new venture and give the company a good foothold in the new business. Lastly, form inter-related functional teams to incorporate diverse skills and perspectives to stir innovation and improve the ratio of success.
Develop a Clear Plan for Diversification
State the objectives, clear plan for achieving the objectives and timeline. The plan should be detailed and encompassing. Identify potential challenges and develop strategies for mitigation. Objectives could include taking a reasonable share of the new market within specified timelines. With the objective, definite plans must in place for development of unique selling points, market penetration, sensitization of new customer segments and key performance indicators to measure progress.
Financial Planning
Diversification costs money and adequate financial preparation must be in place to ensure a smooth take off and survival of the new venture. Estimates of the costs associated with the diversification must be meticulous and should cover research and development, advertising and promotions, staffing, marketing and logistics. Where the organisation cannot effectively cover the financial needs of the new business for an agreed time frame through internal reserves, soft loans or reinvested profits, investors should be sought.
Mandatory Regulations
The company management must check out the regulations pertaining to the new business and make sure they are on top of it. Where there are supervising agencies, registrations and industry obligations, be up to date on the requirements to ensure an easy roll out into the marketplace.
Marketing and Branding
Branding brings its own energy into marketing. The branding of a product could help elevate it in the marketplace or subsume it. Where an organisation has no strong branding team, it may consider outsourcing this to a professional body. The branding should align with the company’s overall brand but still stand out and showcase the uniqueness of the new product. Develop a marketing strategy to introduce the new product or service to the market. Create campaigns that will resonate with the target audience and put the product on their top of head and heart recall. Employ digital marketing, social media, and traditional advertising as avenues to build awareness.
Test the Waters
When the organisation has made all the necessary pre-launch arrangements, it is still not time to flood the market with the new goods/services. Start small. Produce just a small sample to test the market; give the media agencies, bloggers and some key persons or places in your market segment in order to get some good mileage in publicity and feedback. You can use this first batch of new products/services for focus group testing. With this approach, the company will gather valuable feedback, identify potential issues and make adjustments where necessary before a full-scale launch.
The company must make full use of feedback received after this mini production and be willing to adjust plans where necessary. As a matter of principle, the company should maintain a regular evaluation of the performance of the new venture, assessing its compliance with the stated objectives and plans. This continuous evaluation helps ensure that the initiative stays on track and gets quick intervention where necessary and this could subsist at the same frequency for the first 30 months of the diversification.
Lastly, effective and efficient manpower is necessary for success of any venture. The organisation must put the right pegs in the corresponding holes. Staff training and development should form part of the organisation’s management’s core deliverables.
With these initial steps, entrepreneurs can expand their companies, provide avenues for growth for their staff and still sustain financial and market success.
Fatherhood with Ibe
BONES IN MY THROAT?
When I was very young, my father had an acquaintance that was a childhood friend of a very popular and wealthy man. Each time this acquaintance came to our house, he would be full of stories about all the property his wealthy friend had acquired recently and how wicked and mean the man was by not helping him. As a young boy listening in on his rants, I felt his friend was quite wicked and I wondered why my father used to dismiss the man’s lamentations and tell him off harshly.
The years have taught me that there will always be people who feel that you should do more and their expectations have no limit. They come with the mindset that you have more than enough and that you should accommodate their desires. It comes with the territory. I have had some people make some really outrageous requests; one person once asked me if I could assist him to give his family a vacation. He wanted to take his wife and four kids to Dubai for a week and this was a man that I had just helped sort out his house rent. The amazing thing is that some of this people will never admit that they have ever received help from you. Like my father’s acquaintance, all they would sponsor will be negative stories about you.
I had one such ‘friend,’ we called him Bones because he was quite skinny as a boy. He was my junior in secondary school, quite bright, but after he gained admission into the university, he had a wanderlust spell. He ditched school in his first year and told everyone that he was going to complete his studies in Ghana. I believed him but later we heard that he was travelling from one part of Africa to another doing menial jobs. They said he followed ships, worked in ports, embassies, warehouses, hotels, airlines and stadiums. He never contacted me all those years, and I am talking of about 20 years. Then one day, I heard there was that a certain Bones at the office gate and he needed my permission to come in and see me.
Bones? I was curious to know what he’d been doing for the past two decades so I gave the consent to the security to let him in. I wish I hadn’t.
He was in his early forties then. He said he had got tired of moving around and wanted to settle down but first he needed some quick cash to sustain himself. I complied. He then told me that he needed a job and he specified the type of job he wanted.
- Should pay him minimum of 50k monthly.
- Should be with an oil company.
- Must not be a desk job because he needed his freedom.
- Should come with a car and maybe accommodation.
- Should be based in Abuja.
At that time, he had only his high school certificate, a crude knowledge of many countries in Africa and ability to speak passable French and English. His wealth of job experience was in a myriad of menial jobs and there was nothing, about 20 years ago, that qualified him for the kind of job he wanted. I tried to explain this basic fact to him and advised him to start up a service business using any of the skills he had acquired. He got offended and stormed out of my office. I later heard that he was bragging to people that he would make it without my help.
Frankly, I was relieved.
But it wasn’t over with Bones and I. He came back about six months later looking worse than the last time we saw but still with his ‘blings’ and golden tooth. This time, he had found my house because I’d refused to let him come into my office. I stopped at the gate and wound down the car widow, to hear him out. He told me that he’d given a thought to what I said and had decided to start a delivery service business.
I congratulated him.
“What will you be delivering?” I asked.
“I can work with some airlines and deliver items brought in by their customers.” He said.
It sounded like a good plan and I encouraged him to do his due diligence before starting off. He asked me if we could go into the house, sit down and talk. I wasn’t ready to let him into my home after his performance in my office. I told him there was nothing else to talk about and that I was glad that he had a plan going forward.
“We still have a few things to talk about.’ He insisted. “For instance, I don’t know how many vehicles I can start with?” He said and told me that he had a few drivers that would work with him.
Politely, I advised him to meet with the airlines and determine what volume of business they would send his way before employing people.
He waved my suggestion aside and reminded me that he had worked with airlines; he knew the huge volume of goods that would need to be moved out weekly.
“I’m thinking we can start with three vans. You can provide up to three vehicles, can’t you?” He asked me.
It was then that it dawned on me that the whole business discussion was based on my ability to provide the vehicles and whatever other logistics Bones would need. I was flabbergasted.
He didn’t think there was anything wrong with coming uninvited to my house after our previous fruitless encounter and dumping a badly phrased request on me. Three vehicles!
I told him that things were not done that way. If he was asking me to invest in his business idea, I would decide whether it looked viable and how much exposure I wanted in the business. Bones flared up again. He called me names and said he would show me that I had made a big business mistake. For his sake, I hoped he would.
A few weeks later, he applied for a job as a baggage handler in an airline. He named me as his referee, again without informing me. I got a call from the airline and my first instinct was to reject any connection because I didn’t want Bones to put me into trouble. At the same time, I didn’t want him to lose that chance to earn a living and maybe work his way up in the aviation industry. I verified his referee claim … but I was just setting myself up for more mudslinging. We’d had only two encounters face to face but Bones made sure he defamed me everywhere and then, trouble came.
(To be continued)