Diversification vs. Singular Awesomeness in Business: Which is Better?
Diversification—It’s the latest and greatest phrase used in this down economy as the answer to survive this mess we’re in.
In fact, if I had a dollar for every time I heard someone say in the last two years that businesses must diversify to survive I’d be a rich dude. And frankly, I get it. More revenue streams mean more money, right? Well, in reality, I think the biggest mistake many small businesses are making during these economic storms comes back to the famous adage, ‘Jack of all trades, Master of none’.
As most of you know, for the past decade I’ve owned a swimming pool company. Just over 2 years ago when the housing bubble burst, it took down with it the swimming pool industry. Companies that used to build 500-1000 pools a year were forced to close shop, move, or downsize to a fraction of what they’d previously been. Many also added such services as tree removal, landscaping, general home improvements, etc to their services offered. Such diversification has helped many of these businesses survive, but I argue it has also been very detrimental to others. Why? Well before I answer that question, I’ll explain what my company has done during this difficult period.
Hard Times Mean Hard Choices
Just like everyone else in our industry, we were forced to make hard choices when the economy bit the dust. Diversifying into other areas was an option. At the time, we owned a significant retail store carrying inground pools, above ground pools, hot tubs, tanning beds, pool tables, and gaming room accessories. This particular store was one of the nicest of its kind in the state of Virginia, and it had taken us years to get to that point.
But as we analyzed the future of the market, and as we considered what the strengths of our company were, we decided to go in the opposite direction of everything everyone was recommending to us. In other words, instead of focusing on many revenue streams we decided to completely chop off all the areas of our business that weren’t making us a lot of money, yet seemed to be taking so much of our time.
I’ve written about this principle of Pareto’s Law in the past, but the key here is that we made a clear decision to be great at ONE thing, and then let the chips fall as they may.
Our goal was simple: We would be the best fiberglass pool builders in the world.
Notice I didn’t say concrete pools, or vinyl liner pools, or above ground pools. Also, notice that didn’t include, ‘The best retailers in the world’. This is why we let go of the retail division of our company. We got out of the lease on our beautiful store and closed shop, ending all chance of ever being great at hot tubs, above ground pools, tanning beds, etc.
Many people thought we were crazy. This is understandable, but what they didn’t realize from the outside looking in was the fact that once we ended all of these ‘distractions’ from our business we could then become truly great with every aspect of fiberglass pools.
What ‘Being Great’ Really Means
But understand this essential fact my friends—Being great at fiberglass swimming pools didn’t simply mean we’d be the best pool builders in the world, it also meant, and maybe even more importantly, that we be the best fiberglass pool marketers in the world. It was during this time that we embraced inbound marketing, video marketing, blogging, managing our own website, etc.
As most of you already know by this point, our decision to be great in just one area propelled us in ways never previously attained. It also meant that while swimming pool companies were going out of business all around us, we continued to experience incredible sales results. In fact, this past year, we installed more fiberglass pools than any singular company in the country, thus meeting our goal to become one of the best in the world. Even better, I envision a tremendous 2011 because of further changes to streamline our excellence and create a brand and identity unsurpassed in our industry.
I’m not here to say that singular focus is the business model for everyone during these times, but I do believe that every business owner should take a hard look at their business model and see if they have fallen into the rut of being a ‘jack of all trades and master of none’. If you find you’re average in the many services you offer, consider changing your focus. Become great in one area and remember, this also means that you become a great marketer as well. By combining a tremendous product/service with powerful inbound marketing, you’ll very likely be much more profitable and successful than you are today or ever were before, even in the ‘good times’.
So what are your thoughts? Would you suggest more of a focus on diversification in this economy or do you suggest leaning towards more of a streamlined, singular focus approach? Leave your comments below and let’s discuss. 🙂