Thinking of diversifying? Here’s how to do it
Dubai is a model for diversification, but what about its businesses? In the age of disruption, how can entrepreneurs adapt their enterprises to mirror, or even outshine the growth of the Emirate’s economy? Pursuing new revenue streams is tempting for any entrepreneur, but it requires careful planning and a cool head. Get it right and you could turbocharge your business. Get it wrong and your enterprise could be seriously derailed. So, what’s the secret to success when it comes to diversifying your business model? Here are six ways to maximise the benefits of branching out into new markets:
- Do your research
Find out if you’re on the right track from the get go. Would you launch a startup without doing any market research? Of course not. The same applies to diversifying your business model. Before implementing any changes, gather as much feedback from your client base as possible and see where you are going wrong, where you can improve and where you need to tap into new areas. With detailed feedback, you can position yourself to cover the right market and solve the right problems from the outset rather than having to make more costly changes in the future.
Before implementing any changes, gather as much feedback from your client base as possible and see where you are going wrong, where you can improve and where you need to tap into new areas.
Host focus groups with potential new clients. Send out questionnaires. Contact existing clients for feedback on where they think your business could improve. When you have gathered all the data, analyse it with your team members and see where diversifying your business model would work.
- Be open to new ideas
Don’t get stuck on maintaining your old model. If your business isn’t growing as fast as you want it to be, or if you foresee difficult times ahead, diversifying your existing model could be a risk worth taking. But you need to be open to change, and to some extent, risk. One of the best examples of this openness is the transformation of Dubai from an oil-dependent city into a global business hub. This didn’t happen by chance. It is the result of a brave and carefully managed strategy by the Emirates’ rulers to switch focus from a reliance on oil, a depleting resource, to that of trade, transport and tourism – all linked to Dubai’s unique geography. ‘Dubai struck oil in 1969, but today oil accounts for less than 1% of its GDP – the result of remarkable economic foresight,’ says Afshin Molavi, Senior Fellow at the Foreign Policy Institute of the Johns Hopkins University School of Advanced International Studies in Washington. Writing for CNN, he rightly argues Dubai’s latest transition – into a tech startup hub – could be the most consequential. Dubai’s success is largely down to its rulers’ willingness to go in a new direction and invest heavily in geography and infrastructure. Similarly, entrepreneurs who are open to trying something different, and who research, evaluate and test their ideas first, will be well placed to take advantage of changing market trends, and succeed long-term.
- Examine markets you can easily move into
Reduce risk with a stepping stone approach. Diversifying your business model doesn’t necessarily mean waiting for a ‘lightbulb’ moment and then pursuing entirely different revenue streams unrelated to your business. In fact, moving into complementary markets as the opportunities arise could be more beneficial and carries less risk. This approach has powered the extraordinary growth of Dubai technology firm Eurostar which started out in the digital satellite receiver market and has diversified into other technologies including tablets, consumer electronics, HD digital satellite systems, pay TV and B2B convergence technologies. UK entrepreneur Lawrence Jones MBE, CEO of managed hosting provider UKFast, has followed a similar step-by-step approach to diversification. He told Forbes magazine he expanded into data centres ‘when we weren’t getting the service we needed from our current suppliers’. When security became an issue, he launched cybersecurity firm Secarma before acquiring a complementary business to bring a suite of services and ‘ethical hackers’ to the cybersecurity offering.
- Don’t neglect your existing customers
Focusing on your core market is critical Tapping into new revenue streams can be risky if it takes too many resources from your core offering. That’s if your core offering is profitable of course. If you plan to diversify while continuing to develop your core business, make sure your existing customers feel valued. Keep customers informed of upcoming changes. Reassure them that they are, and will remain, important to your business, and demonstrate this with rewards like customer loyalty programmes, promotional gifts and greater engagement through social media, email marketing and other communication channels.
If you plan to diversify while continuing to develop your core business, make sure your existing customers feel valued. Keep customers informed of upcoming changes.
- Get an outsider point of view
Benefit from another pair of eyes. While you may have expert knowledge of your existing market/s inside out, the chances are you’ll need a little help when investigating new revenue streams. Consider hiring a business consultant with expert knowledge of diversification or expertise in the markets you plan to attack. According to Upwork, the world’s leading freelancing site, it is common for internal teams to miss certain problems in the company because of bias or being too close to problems to catch them. Consultants worth their fees can pinpoint areas of concern and recommend necessary countermeasures. Those with knowledge of the markets you plan to enter should be able to help your company outsmart competitors.
- Be passionate about everything
If you don’t believe in what you’re doing, nobody else will. ‘Diversify or die’ we are often told, but it’s not that simple. Even if you do decide to diversify, and you do everything right in terms of researching, planning and launching into a complementary or new market, and you get expert advice, you could still fall short if you aren’t passionate about your new revenue streams. Serial entrepreneur Richard Branson, founder of Virgin, is quoted in Forbes, saying, ‘Always do what you love and love what you do.’ It’s common sense of course but it becomes more difficult the more diverse your business model becomes. If you can tap into this passion and convert it into value for the customer, then you’ll be onto something.
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