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Jack Brandt is a leading expert in channel development for organizations addressing the SMB. He has helped numerous organizations develop online sales channels for their Internet/cloud based services as an advisor and an individual contributor in domains, web hosting, cloud services, and local & hyperlocal search. He as worked directly with hosters, telcos, cablecos, YP’s and drectories, both on and offline to help achieve their goals. Jack Brandt is currently President of Mixed Media Ventures, LLC, and continues to help channel organizations better serve and market to their customers and clients.
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Never completely abandon your core product or service
October 28, 2009 Jack Blogging Build Policy and Procedure Diversification Product Development Small Business

While traveling this week, I had lunch with a prospect, an employee peer of his (who is VP of product with their company), and someone I also consider a friend.  We spoke about where our industry is going, what services may or may not be next on the horizon, what might appeal to discount brands, mid market brands, etc.  It was a good conversation.  When I asked about their process for evaluating new Value Added Services (VAS), I got an answer that started me thinking.  This company is shying away from adding new VAS because they are not sure the executed and deployed those services successfully.  We didn’t get into how they measure the success of product release, but the explanation was one that, in the end, made perfect sense to me.  The synopsis, was that they focused on a certain area selling through their channel, that we will call “identity.”  Identity was the word they used for the ‘core services’ that had made them successful in the past and continue to make them successful today.  So, many of the ancillary services they offered, they may still offer, but know they may not have executed on well.

To my point…  Expanding beyond your core services, may, or may not be a smart idea for you.  I have done a little online research and given this much thought since lunch today.  Here are a few of the reasons I have come up with, not to diversify your business going forward, but to concentrate on your core services and brand:

  1. A gentleman, Cameron Buerger, I used to know in another life, an authorized XEROX sales representative once said to me, more than 22  years ago, “Whatever you sell, whatever you do, specialize in one thing.”  His point is that many companies and sales organizations most successful growth strategies came from knowing one thing so well that it could be defined as the only reason that they were so successful in their marketplace.  It allowed them to refine their process so much, that it allowed their companies to know to the penny what their profit was going to forecast, as well as allowed them to leverage an experienced staff that was focused on one thing.
  2. I call this “Build once implement many” in the software business, or build a process, widget, or service that is sell-able or implementable many times to a wide variety of clients without having to make mass modifications to it eating away at valuable profits.  A good friend of mine at Delaware.net has adopted this theory, and has slashed his product development time exponentially, streamlined the implementation process, as well as allowing him to maximize profitability with every client he has.  Because of this, his clients are extremely happy, and so is he!  It gives him a strong core product that is easily adaptable on a per client basis.
  3. With the commoditization of products and services today through a variety of channels, profitable growth has slowed, and is getting much harder to achieve.  There is mounting pressure everywhere to increase profits by squeezing an organization until it almost pops like a balloon.  This fosters unrealistic forecasting and mounting pressure to achieve almost unbelievable sales objectives.  I read several statistics this evening that stated almost 75 percent of business disaster is because of expansion efforts outside an organization’s core product or service failed.  That too much emphasis was put on it/them for success while abandoning the core products and services that made them successful.
  4. Most companies that were successful at providing services other than their core services, came from deep research and insights, rather than high level concepts and emotional decisions based on sexy new features.  I recently saw this with an Internet company that chose a new vendor for a product based on features vs. the solid back-end technology of another vendor.  The result, a six to seven figure mistake, and lot of lost customers.
  5. CEO’s and Sr. Management in many organizations are under increasing pressure to perform and increase profitability.  Many Sr. Management teams are forced to look at diversify8ing their product or service portfolio in order to meet the profit demands of their stockholders and boards of directors.  Again, the 75 percent number came up several times, illustrating that 3/4 of the initiatives failed to provide profitable results for their respective companies.  It is clear there is no silver bullet, or magic wand to waive that will make the diversification efforts profitable in any period of time.
  6. A weakening core business also prompted many organizations to look at diversification.  Even this past weekend, I suggested to a friend, in this weak economy, he may want to diversify and look at additional products for his heavy equipment line of products.  Maybe a mistake I made, prior to my research regarding this blog post.  Strengthen your core product instead, as well as your sales pitch and put yourself in a better competitive position instead.  Those few extra sales you may make could save the month or quarter.
  7. I read two blog posts this evening (and maybe that was not enough research) that stated most companies do not have an adequate product development process or plan to evaluate new products and services for their customers.   It seems true, as several of the companies that I have been in, and consulted for, seem to have a topical process at best.  They get stuck on a few features they like, interdepartmental teams cannot agree on goals and objectives,  and Sr. Management is held hostage to the research their employees provide, never knowing if it is objective or thorough enough.  This leads to faulty decision making, and bad implementations and execution.
  8. And finally, there are three items to be aware of when making any decision to diversify away from your core product or services:
    1. How does the new product or service relate to your existing core product or service.  Simply, if it doesn’t, then don’t consider it.  Come up with a scoring system for features and how they relate to your core product or service.  If it ranks below 80 or 90 percent, don’t do it.
    2. How is it going to compliment your core service in terms of generating new revenue and profitability.  If it is a product or service that can help sustain the life of your core, or extend the lifetime value of your customer exponentially, it may be worth pursuing.  If not, don’t.
    3. Can your organization sell almost as much of the diversified product or service as you had your core product or service, so that the efforts yield profits to a level that they are equal to your core?  I thought this was a particularly good question.  I am willing to bet most answers will be, “no.”

Your choice to diversify your offering(s) is/are important ones.  They literally could shape the future of or break your company.  They are hard decisions to make, because as an owner or manager, you may be emotionally charged.  The employees making the decision may be emotionally charged.  This adds a bias to the process that should not exist, but does, more often than not.  Many companies also have no standard process in place for this evaluation to exist.  It makes it harder for you, as the process itself will be flawed.  If you are looking do diversify, do your research on how to do your research and selection of new products and services.  Pick up a book or three on product development in growing organizations.  Read them, and implement their practices.

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  • E-mail: jack@jackbrandt.com
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