When Safaricom announced the launch of their Big Box, a foray into the world of pay tv currently dominated by numerous rival set top boxes, no doubt a lot of us had the same reaction: “…what?”.
Safaricom, a locally famous (or as some would argue, infamous for questionable rates and moody network) telecommunications company is a titan in it’s field- mobile phone networks and associated services. What then would they be doing venturing into providing Kenyans with television for pay? Structured much like another local digital TV provider, the Big Box promises TV channels as well as internet connectivity services. The answer, dear reader, is diversification. The cliché states that “what does not grow declines”, and growth does not have to mean staying in the same. After all, remember Safaricom began almost exclusively as a mobile network provider; any additional services you may enjoy today are as a result of diversification.
So how exactly would one define this concept that seems to drive business giants? Strictly speaking, “diversification” can be explained as a company entering into new locations, serving a new customer segment, or launching new products and services that were not part of its previous offering. The concept behind it is simple: don’t put all your eggs in one basket. A company with interests across different markets or industries is more likely to recover should one of its arms collapse, than a company that relied completely on one product or service that has now failed. The purpose of diversification is therefore two-fold: managing risk and expanding business or revenue.
When applying diversification to your own company, the option to play follow the leader with your braver competitors exists, but note that the earliest adopters are generally the only ones to reap a suitable return from a bold move. Instead, look inwards, more so for logistics firms. What service or goods do you supply that can be adjusted to suit a different audience while still maintaining your current base? Which new locations can you plausibly expand into, especially for those already in the logistics industry? Is there a product or service that is similar to yours? This might be a good bet to adopt since the cost of adding it to your roster should not be as restrictive as a completely out of the box alternative. Additionally, you will already have a rough idea of how the similar market operates and hit the ground running.
At the same time, analyze your supply chain as a whole. What parts of it that you currently outsource to third parties can be handled in-house? Reverse or horizontal integration can be an excellent way to spread your corporate wings as well. Consider also any technological advances that may render your company obsolete or lagging behind the times and launch an effort to stay ahead of the curve. For the truly adventurous, look far beyond the limits of your industry to see which sector is likely to experience a boom: with the global digital migration deadline looming, it makes sense that Safaricom would choose to try their luck with an industry that is sure to be worth significant potential profit.
As you can see, diversification is a concept applicable across the business board including logistics with the help of just a little creativity and management willing to face risks for the potential increased returns and security of operations. How would you as a manager in your field diversify your company? As far as the Safaricom Big Box: big fail or big business lesson? Wishing you all a wonderful week.