When I started my first business, I thought I had it all mapped out. I had this image in my head of what I would be doing 3 months, 6 months, and a year into the future. As I started to watch the market and hone my skill set, I realized I needed to diversify my offerings and my customer base if I truly wanted to grow my business.
Diversifying beyond your core business is nothing new. I think of Eastman Kodak’s rise-and-fall, how it specialized in film and photography for so long only to experience a collapse when, inevitably, technology outpaced its product. Now, it has been brought back to life by diversifying its product to both hardware and software features. The challenge in diversification is offering new products without losing focus on that core mission that gave you your first burst of success.
Your Startup Products: Why Diversify?
If you already have a killer product that has been welcomed by the market, it might be all too easy to kick back and comfort yourself in success. It’s only natural;, you spent so much time and effort building something great and now it is finally paying off. But there are several reasons that now is not the time to get comfortable.
Every piece of technology has a finite life cycle. Eventually, it will be replaced by something more advanced or competitors will pop up with their versions of your product and dilute your market share. If you can stay at the forefront of innovation, you will always have an advantage over your competitors. One of the easiest sources of innovation is staying up-to-date with your electronic parts, and making sure that if a new component arrives you can update your product.
Innovating and improving your new product go beyond upgrading and creating a newer version of the same piece of technology. Your goal should be to diversify your product portfolio while maintaining focus in your key area of success. Diversifying creates a risk that your already limited resources and personnel get spread too thin. Therefore, it is a good idea to diversify into products that are closely related to those that helped create your initial success.
Your Product’s Growth is Your Growth
Diversifying your product line, if done correctly, creates some important benefits for your company’s future (and bottom line). The most obvious is an increase in ROI. By leveraging your team’s knowledge and your intellectual property, and by selling it into new markets, you’re able to bring in new revenue without significant additional investment.
Diversifying your customer base also reduces income risk. Any financier will tell you that you should never put all your eggs in one basket. By spreading your revenue streams among different markets, you reduce the risk of a product coming to end of life or a downturn in a particular customer segment. On average, this maintains your income stream over time and can even increase it if a product becomes hot with your new customer segment.
In addition to diversifying your customer base, you can increase the loyalty of your current customers if your new product caters to their needs. Your customers know your product and its capabilities and they may even know your product better than you do. Marketing your spin-off directly to your current customers can make them more dependent on your product line, and you develop a deeper relationship with them in the process.
As you spin-off that second or even third product, your team gains experience with developing products in this particular area. They inevitably become more efficient with carrying out the design, testing, and delivery process. This can have a major impact on margins, especially in industries that are heavily knowledge or labor intensive.
Variations for Startup Product Diversification
As your business matures, you may notice new opportunities to offer new products that you had never considered. One segment of customers might be using your product outside of its intended purpose. It this happens, then it’s worth doing a redesign that will optimize your device for this new purpose. If your customers are engaged, they will tell you what new features they want to see in your product.
Suppose your customers are using your mobile product in applications where repeated charging is a problem. Rather than just giving the next variant a bigger battery, you can optimize your design so that power consumption is reduced. You can also design your variant with a battery that charges faster while having the same or better capacity. This new variant can be offered as a premium model and fits perfectly in your existing product line.
You might not have anticipated your customers using your product in an environment that affects its reliability. Using some electronic devices in environments with extreme temperature, pressure, or humidity can significantly degrade their lifetime. This creates the opportunity to develop a variant that can function reliably in these extreme environments. This creates more value for your customers and allows you to market a premium model.
Many users of environmental sensors need to take multiple measurements at once. If your company develops sensors, it might make sense to integrate your devices in a single package. Rather than purchasing their sensor piecemeal, your customers can purchase a single integrated package. This gives your customers greater capabilities and flexibility.
If you are engaged with your customers, you will see the clues and perhaps they will even let you know directly when they are ready for your next product. And keep an eye on your competition. If they start selling a new product, and you can build it better with just a variation on your own product, it might be potential win and time to get started.
If you’re a looking to diversify your product line and you are ready to build your next product, Altium Designer has advanced design functionality and an extensive component library that makes building your new product a breeze. Talk to an Altium expert today to learn more.
Editor’s note: this is a contributed post written by the fabulous team at Altium. For more information on the company and their products, please visit their site at altium.com.
Originally published at hax.co on April 15, 2018.