Learn how to analyze and deal with the risks of radical diversification.
- Pursuing growth by radical diversification. … That is creating or acquiring your business … where you offer entirely new products and services … to entirely new target customers … can be a high-risk strategy. … How large the risks are depends … on the extent to which the new business … leverages the core capabilities … of the company's existing operations. … The oil giant Exxon's failed attempt to diversify … into the computer business … illustrates well the hazards of entering … an entirely new business … that requires a very different set of core capabilities … than the company's existing operations. … The story goes back to the late 1970's … when after the Egypt Israel war … Exxon faced an environment of very high oil prices … and sharp contraction in the demand for oil. … Exxon looked around for growth opportunities … in new industries … that were large in size, likely to keep growing … at a double-digit pace, and, acquired lots of capital. … It honed in on computing and decided to go head to head …
- Recognize the problems a company may encounter if it does not achieve growth.
- Identify high-potential opportunities for growth.
- Identify new customers for existing products.
- Use assessment screens to choose the best opportunity.
- Evaluate partnerships and acquisitions as mechanisms to fuel growth.
- Break down the components of an effective and growth-minded leadership team.