Having a successful company thriving in multiple sectors is every ambitious entrepreneur’s dream. After all, diversification can be an effective route to rapid growth as new markets are established. But it’s a high risk strategy, that takes great insight, considerable investment, and that all-important passion.
Disney, Xerox and IBM are great examples of brands that have embraced change and avoided inertia by developing new products and services and entering new business sectors. But when it comes to extending a brand across a wide range of sectors Virgin has to be one of the most prolific, going from music and airlines, to trains and finance, and with cruises and space tourism now in its sights.
“Almost all of our Virgin businesses have been built out of frustration,” says Virgin founder Richard Branson. “Frustration can lead to great disruption, and we’ve looked beyond the standard and dull ways of thinking and pushed the boundaries of expectations.”
Virgin Australia, for example, was launched in 2000 with only two aircraft and one route between Brisbane and Sydney. The goal, even then, was to bring much needed competition to aviation in Australia, lowering airfares and giving consumers more choice when flying. The company went on to become the second largest carrier in Australia.
The strategy of targeting industries ripe for disruption, using Virgin’s distinctive way of shaking things up, has been a successful one, even in the face of fierce competition from larger companies with bigger budgets.
“We have had to focus on getting the customer experience and service absolutely right,” says Branson. “Good customer recommendations help overcome the lack of marketing spend by creating awareness and attracting loyalty.”
In deciding on which sector to target, Branson’s golden rule is to move into one that you are passionate about and be in the business of diversity. “Always do what you love and love what you do,” he says. “And with a diverse workforce, you have a diversity of thoughts, approaches and outcomes to the challenges your business will face.”
As well as having the right people on board, business owners looking to enter a new market sector must ensure that the new offerings create value for the customer.
For Lawrence Jones, founder and CEO of web hosting firm UKFast, who has since expanded into cyber security, building and recruitment, the key to diversifying lies in identifying areas to make cost savings, while improving standards and delivery time. Echoing Branson, he also insists that passion is crucial to a successful outcome.
He says: “People ask why a technology business would be interested in spinning out a building firm like UKFast Space, but it’s a very natural fit and something I’m passionate about.”
Having anticipated the need for significant expansion for UKFast’s own property portfolio, Jones has seen the building company grow, with a team of 50 working on construction projects for both UKFast and other clients.
The recruitment business, MySort, was born out of the sheer pace of talent acquisition at UKFast, and now recruits talent for several other companies. “Again, I’m passionate about it because of the amazing people we’re helping to find roles in great companies,” says Jones.
Not all of his plans to diversify worked out. In 2002 his company began selling mobile phones to businesses, boosted by the launch of a marketing strategy based on a bulk text messaging system they’d developed. Shortly afterwards bulk text messaging was made illegal in the UK, and the venture didn’t survive.
“That incident taught us a lot and we decided never to sell someone else’s network again,” says Jones.
Serial entrepreneur Andy Scott, who operates in five different industry sectors, including property, events, transport, catering and recruitment, takes the pragmatic view that good business ultimately comes down to the numbers, a solid management team and having a mid to long-term exit plan.
However, when it comes to diversifying your company, like Branson, he believes the most important quality an entrepreneur needs is passion.
He says: “You will invariably make expensive mistakes in the first months of operating in a new sector, and that passion is what will make you stick at it and stop you from giving up. If you make it, the rewards of operating successful and profitable businesses in different sectors are immense. You’ll have a sense of pride, safe in the knowledge that no one can call you lucky, or a one-trick-pony.”
With an ambitious diversification strategy there will be missed opportunities along the way, but as Branson points out the key is to focus on moving forward.
He says: “My mother always taught me never to look back in regret, but to look for an opportunity to move on to the next thing. That’s not to say I haven’t learnt from challenges, but I prefer to see them as opportunities to improve or perhaps inspire others.
“Virgin Cola didn’t quite work out; the sector was fierce and we underestimated our rivals, but one of our former employees, Adam Balon, noted the market for fresh fruit drinks and went on to co-found Innocent Smoothies with two of his friends. They created a very successful business before selling the company to Coca-Cola.”
His advice for any business looking to move into other industries is to make sure that you fully understand the market you’re moving into, and that everyone in the company as well as your customers, understand why you are doing what you’re doing.
“Your team will be crucial in helping you to make the leap and get the message across to your new customers,” he says.