My board wants me to expand my highly successful business into a number of somewhat related, but mostly peripheral areas. I am worried I will not be able to replicate the magic of our core business. Should I stick to what has made me successful or continue to expand?
If you are successful, you may someday find yourself at a crossroad like this one. Perhaps you have saturated your core market and the only way to continue growing is to move into adjacent areas. It is hard to opine on growth without the specifics of your industry, but a few thoughts:
Make sure you actually have fully wrung out the value of your core product. Try to expand to other markets with your core product first. Have you expanded globally yet? Does your product work for a different age demographic? Have you tried new channels or customer segments? Perhaps you can create an enterprise or corporate version of your product to complement the consumer version (or vice versa). Or you can use others with better brand and distribution in those segments to sell for you.
The reason to continue expanding your core first is because you have figured out some secret sauce to make it work. A general guide to business success is: (1) find an edge, (2) exploit that edge until it goes away, and (3) when (2) is no longer true, see (1). Of course, it is not always as easy as that: international markets vary, different segments have disparate product and pricing needs, and other demographics may see no value to your product.
At some point, you will reach an asymptotic point where you have gained most of the market share possible. No one will need more thneeds or you will exhaust your Truffula trees. (Feel free to Google.) You can keep the company steady state, sell, or find new vistas. The easiest areas for expansion will be creating applications and services on your platform, ancillary businesses you create, and related applications of your technology in adjacent fields.
If you enable a vast ecosystem, what other businesses can you create that do not result in conflicts which would destroy your relationships with key customers?
If your business creates network effects and new behaviors, many other companies will create businesses to satisfy those needs if you do not. In an early class, we discussed “hanging around the rim,” meaning you can create businesses built around the success of others. EBay, for example, saved PayPal and created many auction software platforms and logistics services. Today, cryptological projects have created the need for mining and farming equipment as well as mining/farming expertise, exchanges, and professional services companies.
Also ask whether your technology can solve problems in adjacent fields. For example, can your bioinformatics analysis tool solve quantitative trading problems or supply chain analytics? Often, you will lack the market knowledge of how to adapt the technology for those new areas, or even how to sell in those markets, but you can find an industry expert and create some exploratory projects with early customers to see if your technology solves their problems.
Beware of growth for its own sake, though, as it can kill your company. Thoughtless growth can kill culture, squelch the innovative spirit of your company, and can lead to a drain of your most creative and nimble people who will seek to experience afresh the thrill of being in a startup elsewhere. Growth can also erode your business by causing you to spend on dead ends. In medicine, unchecked and out of control growth has a name: cancer.
If your new ancillary areas do not cut it, get out fast. Succeed or fail quickly, and pivot deftly, as you would were that new business your entire startup. Any expansion you do should always follow the same fundamental principles that make startups successful in the first place: Lean Startup methodology, Design Thinking, Growth Hacking, and a great culture. You can always be a startup at heart, even as you expand to new heights.
Finally, never forget your massive transformative purpose or “why” you exist. If you cannot articulate an expansion strategy in that purpose, you may find yourself abandoning your most core business and brand value.