There are two distinct types of successful businessmen and, accordingly, business strategies.
The first prefers to develop one business without being distracted by other spheres, even if they are quite appealing. This is what we call the “classic” type of businessman, typical for the pre-industrial and industrial times.
The situation changed at the end of the 20th century. That is when the term “startup” appeared. To be more precise, the word “startup” was first used in a Forbes article in August 1976.
Entrepreneurs of the past would have envied present-day entrepreneurs. Currently, you can do it all from your computer: organize logistics, purchase equipment, send goods, hire specialists. Technically, opening a new business has become quite simple.
However, to succeed, in addition to technical capabilities, you need entrepreneurial skills, the ability to be in the right place at the right time and, of course, luck.
Diversification of an existing business differs from a startup implemented from scratch. A business requires management experience, a professional team, and financial and material resources.
It is important to mention, we are talking about diversification, which involves the creation and development of new businesses, and not the acquisition of existing ones.
Today successful companies have a real technical opportunity to diversify their business. However, such expansion is not mainstream – the traditional approach still prevails, and diversification largely relates not to production and services, but to portfolios of stock market players.
Big Business Romantic
Perhaps, the most famous figure and number one person concerning startups is Elon Musk.
Musk’s strategy can be defined as infinite diversification. He chooses a new direction, very clearly states the strategy and mission of the business, finds partners and quickly moves on to implementation.
Musk is not that omnivorous, he is interested in a beautiful business, preferably one that creates new demand and opens up new markets. He can be called a business romantic…
Musk looks at business from the point of view of its future prospects, for him, standard categories such as quick payback are not fundamental. A notable example is the Reusable spaceships’ project which is definitely not about quick investment returns.
Musk is often accused of using state aid… But try to negotiate with the state yourself, convince officials, infect them with your enthusiasm and prove that your ideas are not the delirium of an eccentric dreamer.
Earn money everywhere!
Russia is one of the few countries where Google’s search engine has a powerful national competitor – Yandex.
Yandex started out as a “classic” IT company. A search engine, mail, contextual advertising – a sufficient set to take top positions on the network. However, the company was cramped within the Internet, it longed for the real world.
Unlike the romantic Musk, Yandex preferred more down-to-earth projects. Although, despite the lack of cosmic scale, they are quite innovative and can be considered revolutionary for their industries.
The Yandex taxi has actually created a new market. In Russia you just open the Yandex application, and a car arrives in a few minutes.
The delivery service has also become an integral part of big cities’ life.
Yandex’s success is largely determined by its business diversification policy, which is not quite typical for IT companies. The decision to leave the comfortable network for the real world was quite risky, but it paid off.
Blockchain and diversification
Diversification in crypto-industry, as a rule, means diversification of the cryptocurrency portfolio. However, some true leaders find it difficult to stay within the framework of one business.
LADO, the founder of Holiverse, started with a digital De-Fi platform that transformed into a metaverse. The project turned out to be successful, the business became routine, and the company began trying itself in new, and quite unexpected areas. Holiverse opened its own production of cosmetics and dietary supplements, entered the media market with creative projects and took up DNA research.
Modern crypto business contains risks that are almost impossible to manage within the framework of one project. These include regulatory risks related to the legislation of individual countries, high volatility of cryptocurrencies, and unpredictable political and general economic risks. Therefore, diversification related to going beyond the crypto market is a reasonable approach. Holiverse also takes risks by opening new directions, but in case of success, receives a prize in the form of a stable and sustainable business.
Banks are building ecosystems
At the beginning of the century, a rather controversial term became widespread – “banking ecosystem”. Banks, using accumulated financial resources, began to actively build related service systems. Digitalization made it possible to directly communicate with clients, which mainly stimulated the introduction of new services.
Giants as Citi and Standard Chartered have created global ecosystems of services that provide a variety of financial and related solutions. Wells Fargo is considerably immersed in the business of its clients and is able to provide them with a more accurate choice of services, while at the same time it does not stray far from the financial sector. Russian Sber creates a more diverse ecosystem. The bank’s interests include, in particular, an online marketplace, artificial intelligence, large-scale development projects, food delivery services, online streaming services with their own media projects and much more
What bankers do, in most cases, cannot be called full-fledged diversification, it is rather an expansion of the functionality of an existing business.
Diversification and organization of new directions “from scratch” is one of the tools for increasing the efficiency and sustainability of a business. However, this is not a magic pill at all, we have given examples of successful diversification, whereas there are significantly more unsuccessful examples.
The decision to start new directions is made by the owners and managers of companies, and much depends on their state of mind – healthy adventurism, the ability to assess risks and a propensity for innovation. Education, and experience are certainly important, but talent and a special mindset are also important. These concepts are not economic, but important. That is life!
