HOW AND WHEN TO DIVERSIFY YOUR BUSINESS

In the first of two articles on diversification, Peter Savage offers advice on building your business by diversifying within your existing business and market
I had an interesting experience last week, and one which conveniently leads on to the subject of business diversification which is my topic for this month.
Some of you might have seen that I had my first attempt at live TV when I took part in the TV-Bay broadcast live show. I was interviewed for a five-minute slot in a magazine style programme that looks at industry topics. It was an intimidating process that I think I enjoyed and that I hope to repeat sometime.
The interesting part of the show is what it demonstrated about TV-Bay: it is very adept at turning ideas into revenue streams. It has moved from publishing a magazine in the purest sense to producing video interviews at broadcast exhibitions and, now, to having a full-blown live TV stream.
Let’s look into the TV-Bay analogy a little further. The magazine had probably reached the point where it had got all it expected to get from its circulation and I assume – and this is all assumption as I have no insider information – that the team sat down to think about how they could improve revenue from their current format. This is how it might have gone …
Diversity within your market
The first idea was probably to look into buying another publication, to try to find one that was not performing as well as it should, or that needed a makeover, or simply that its owners needed to sell as they wanted to move on. The new title could run alongside TV-Bay, some costs (such as marketing and printing) could be shared, and they could use each other’s databases to help increase total circulation. They would therefore have diversified in their own market – as publishers.
Capitalise on existing activities
They might also have felt that, as they had a high exposure at industry exhibitions, they should look at ways of capitalising on that. They had to appear at the shows to push the magazines but, as the magazines helped to publicise the shows, the shows needed the magazines – so, as this created a co-existence, I expect they wondered how they could make the most of their time at the shows. This led to the idea of talking to their clients (the businesses that spend money with their magazine) to get their views on video. These interviews could be used as show references and/or to drive more traffic to their website. Their diversification ideas were extending beyond their own market, as publishers, into broadcasting, a subject that is closely linked with their market.
A natural progression
Once this had caught on they might have asked themselves, “why not get people to pay to have their thoughts on a show that would be put on the TV-Bay website?”. The idea might have been that these interviews could pre-reference what to look for in the show. Their next thought could have been that they could have roving interviews throughout the exhibition as the de rigueur reference point. Another business model was growing.
Once they had established that this was a route to market, and that people were interested in watching their video clips, the natural extension was to turn this into a full-blown TV show, broadcast-themed, using their expertise, contacts and, more importantly, the type of content they knew interested people.
They had leverage with their existing database from the two publications, and with the information they had gleaned from all the shows. All things being equal, they could well have thought, all these initiatives and diversifications should add revenue and, ultimately, improve the business’s bottom line.
Don’t get distracted
These were all great and constructive ideas, each developing and diversifying from the initial core business. However, the key aspect, and probably the most important point apart from having good ideas, is the measurement of success. Everyone loves feeling busy but, and I can’t emphasise this enough, you must check that new initiatives bring benefit to the bottom line. If they don’t, they are simply distractions that take you away from your core business.
Time is money too
First, and here I go again, you need a detailed plan (yes, yes, you’ve heard it all before – but businesses that succeed have planned to succeed). And you need continually to measure the performance of a new division against your expectations. You must work out how much money you will invest in any business diversification – remembering always that time is money … so measure your time, too.
To prove that I speak from experience, when analysing our operation overseas, we budgeted to the nth degree when considering costs. We found, however, that we had not done the same with our time – our staff were spending time in Germany that we were not re-charging.
Stay close to the core
It would be interesting to get feedback from the TV-Bay guys on which of their diversifications sits best with their business model. In my view, as the new initiatives are close enough to their core product, they should all complement each other. Trouble starts when people diversify into completely different markets, or business types, as most industries have completely different ways of working. The blueprint for a leasing business won’t necessarily be the blueprint for, say, TV production. Which brings me onto next month’s article which is about diversification outside your industry.
For advice on options for building your business, do email me on peter.savage@azule.co.uk and/or write to the TV Bay editor. For more information about us, or to read other articles in this series, look at our website: www.azule.co.uk.