Characteristics of a successful diversification
strategy
Platform of Existing Capabilities:
Any diversification strategy should be built on the foundation
of existing competencies. This facilitates entry into new
markets. A company can have multiple capabilities, but a
capability qualifies as a core competence if it fulfils
the following criteria:
New Capabilities: Though the strategy
is based on existing capabilities, companies should acquire
new ones to augment these. They could be toward acquiring
new technologies, distribution channels or adding marketing
muscle.
Management Skills and Leadership: Implementation
of the strategy will require strong and aggressive management.
The owner / manager may have to take swift, decisive measures
during the diversification effort. These could be decisions
related to investment or downsizing. These decisions may
be risky and face resistance from employees. Strong and
visionary leadership is required to ensure successful implementation.
Employee Skills and Productivity: A
skilled and autonomous workforce is a must for the diversification
strategy to succeed. Employees are more productive if given
autonomy.
Lean and Tenacious: Companies that
can maintain a lean management structure can avoid high
overhead margins. The success of the diversification ultimately
hinges upon the tenacity of the personnel to see it through.
Diversification to new markets can be a risky
proposition. The risk can be minimised if companies can
identify their strengths and evaluate market opportunities
accordingly. The key for small companies is to identify
markets where their capabilities can be profitably leveraged
to create customer value.
