Focus Now, Diversify Later!
The Digital entrepreneurs in India are going through an exciting phase of rapid growth as more consumers access the web via mobile. Many companies have scaled up users and transactions rapidly in a short span of 2-3 years. Many of these companies are at critical junctures in their life cycle where they need to make sure the organisation strategy, HR, etc are aligned to support future rapid growth. Yet what surprises me as I speak to some of the entrepreneurs is their focus on new areas which is bound to take away focus from the core. Which would have been fine once a business is established and growth is slow, but not at a time where business is just about getting started.
1. A transport aggregator tell wants to get into food/groceries
2. A classifieds directory service wants to get into delivery of products
3. A horizontal ecommerce player wants to get into renting flats
4. A mobile recharge wallet company wants to build an ecommerce marketplace
Many of these new areas of growth while sound adjacent, they require very company DNAs -
Aggregating taxis and making sure you deliver fresh bananas on time are not similar businesses. The latter requires product sourcing and cataloguing, vendor inventory management, logistics, etc.
Collecting data of a store and giving the phone number to a customer who calls is very different from ensuring the selling ships the product to the customer and collects the monies, manages returns, answers customer queries on the product.
Selling a mobile phone and renting a flat follow very different buying behaviours. The user experience, the trust, the paperwork in renting a flat is very important.
Creating a wallet where users put cash to buy mobile recharges and selling T-shirts require very different back end partnerships, fulfilment capabilities, etc.
As a company is scaling rapidly, it requires both management leadership bandwidth and capital prioritisation. If a new area is launched, it cannot scale rapidly unless it also gets the same level of human and capital attention. Human capital, namely entrepreneurial leaders, product managers, etc are not easy to find. There have been a limited set of companies in India that have seen rapid entrepreneurial cycles where such talent exists. And getting new talent from traditional settings like consulting, FMCG can be time consuming. And more importantly setting the vision, direction for new leadership in a new business will require serious entrepreneur bandwidth. So trying to manage a hyper-growth core business while trying to build a new business with the same hyper-growth ambitions can be tricky. Entrepreneurs sometimes forget the focus he or she gave to starting the core business. They feel that by getting someone new to focus on "the new initiative" will be sufficient to get it to a successful start.
My advice - Focus on the core business till it is somewhat stable, has a very strong leadership and management in place and is getting somewhat self sufficient or less dependent on capital needs and then look at pushing the pedal on a new business area for hyper-growth. Expansion and Diversification is not a bad thing. In fact, it can be an important value driver for the company. But the timing is key to be able to give it adequate attention.
1. A transport aggregator tell wants to get into food/groceries
2. A classifieds directory service wants to get into delivery of products
3. A horizontal ecommerce player wants to get into renting flats
4. A mobile recharge wallet company wants to build an ecommerce marketplace
Many of these new areas of growth while sound adjacent, they require very company DNAs -
Aggregating taxis and making sure you deliver fresh bananas on time are not similar businesses. The latter requires product sourcing and cataloguing, vendor inventory management, logistics, etc.
Collecting data of a store and giving the phone number to a customer who calls is very different from ensuring the selling ships the product to the customer and collects the monies, manages returns, answers customer queries on the product.
Selling a mobile phone and renting a flat follow very different buying behaviours. The user experience, the trust, the paperwork in renting a flat is very important.
Creating a wallet where users put cash to buy mobile recharges and selling T-shirts require very different back end partnerships, fulfilment capabilities, etc.
As a company is scaling rapidly, it requires both management leadership bandwidth and capital prioritisation. If a new area is launched, it cannot scale rapidly unless it also gets the same level of human and capital attention. Human capital, namely entrepreneurial leaders, product managers, etc are not easy to find. There have been a limited set of companies in India that have seen rapid entrepreneurial cycles where such talent exists. And getting new talent from traditional settings like consulting, FMCG can be time consuming. And more importantly setting the vision, direction for new leadership in a new business will require serious entrepreneur bandwidth. So trying to manage a hyper-growth core business while trying to build a new business with the same hyper-growth ambitions can be tricky. Entrepreneurs sometimes forget the focus he or she gave to starting the core business. They feel that by getting someone new to focus on "the new initiative" will be sufficient to get it to a successful start.
My advice - Focus on the core business till it is somewhat stable, has a very strong leadership and management in place and is getting somewhat self sufficient or less dependent on capital needs and then look at pushing the pedal on a new business area for hyper-growth. Expansion and Diversification is not a bad thing. In fact, it can be an important value driver for the company. But the timing is key to be able to give it adequate attention.
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