Many CEOs decide to get into a new line of business without a clear view of what’s involved or how they’ll accomplish it. They may not fully understand how to provide the services, and they often have only the vaguest idea of how to sell enough of the products or services to make the venture worthwhile.
Announcing you’re in a new business is very exciting. That’s the easy part. But buying new equipment or technology, or adding a new product line doesn’t make your company a fundamentally different business.
You can’t make an announcement and pray that sales come in the door. You need new organizational skills to support the business and a sales and marketing effort that will help the market to understand your company in its new form.
Announcements don’t change much
Announcing you’re in a new business doesn’t make it so.
You need new capabilities, new support skills and a new sales effort as well.
All too often, companies jump into new markets simply because someone else has done it, assuming that “they’re a lot like us, so if it’s a good idea for them, then it must be a good idea for us.”
But it may not have been a good idea for the other guy. Don’t become a me-too competitor by accident: Evaluate your competitive need to keep up, but make sure it makes sense for you.
Everything looks easy from the outside. Making a new capability work in the marketplace is always slower and more difficult than it looks. And even when you’ve made it work, it remains an open question as to you can you do it well enough and sell enough of it to make it profitable.
Many companies move too quickly into markets filled with participants who are struggling to be profitable. And too many companies develop new capabilities for a single large customer, without any thought to broadening the sales base to include other customers with similar needs. (Or worse: there may not be any other meaningful customers on the horizon with similar needs!)
Beware of false prophets (and business journalists)!
The business press loudly welcomes every new business idea.
Who knows if it’s right for your company?
It’s never been more crucial to keep up in offering new products and services in continually-evolving markets. But the new business areas must be consistent with the underlying assumptions you’re using to build your business.
Unless you’re in the space exploration or microchip business, don’t fall prey to the quick thrill that comes from being an early entrant into a new market or the first provider of a new product. You’ve got to make sure it’s right for you and your company, and then you’ve got to develop a plan to make it all work. Ask yourself whether you’ve taken a careful enough look at the market’s promise — for your company and your company’s capabilities. Does it really suit you? Are you well-positioned to make it all work?
Can you make the market believe your new claims? Are you capable of delivering on your promises in ways that will make customers happy to do business with you?. Do you have the sales and marketing resources required, and the necessary operational resources to support it all?
Being early-to-market is always an exciting position to be in. But if you don’t take the time to do a thorough evaluation and carry out meticulous preparation, you’ll have plenty of time to regret your decision.