Diversify. Differentiate. Dominate.

I read a lot about innovation.  I write a lot about innovation.  However, in order to translate innovation into long-term business success you need to do more than just innovate.  You have to strategically diversify and differentiate.

Igor Ansoff's Product/Market growth matrix identifies the four strategies companies can employ to achieve organic growth.

Think about all of the great ideas that have been started in the last few years.  There is a cycle that has developed and it goes something like this:  A novel, perhaps even revolutionary, concept usually centered around some sort of mobile application is developed.  The idea spreads slowly at first with users acting as grassroots marketers.  After the idea gets some legs, there is an aggressive marketing campaign and the thing really takes off.  It is all people are talking about on blogs, around the water cooler, and even on CNBC.  The sales team grows by leaps and bounds.  They are raking in money.  Everything looks good.  There might even be an IPO.  Then comes the copycat. This new company doesn't really offer anything different than the originator and never get the same recognition as the first but they do OK.  That is when the symptoms of the underlying problem begin to present.  Once the second company gets into the market and achieves some modicum of success with little to no friction, the market gets flooded with others trying to do the same thing. That innovative idea has now become a commodity.  It is no longer a novel concept.  It is just a thing.

The real issue started well before that second wave of copycats.  It occurred when the original company failed to develop the idea into a business that was sustainable in the long term. They failed to grow organically.  The idea was always a commodity; they were just the only one selling it.  There were no barriers to entry in the market.   There were no switching costs for the customer or suppliers.  The innovators simply failed to capitalize on their first to market position in any meaningful way.  Anyone who has ever taken a business strategy course could have seen this coming a mile away.  

The company should have been performing strategic analysis and identifying organic growth strategies before they even went to market.  Had they done so they would not have been surprised, or really cared for that matter, when others attempted to enter the market.  They would have been prepared to defend their position or had the company hedged with a diversified offering of services well before the second entrant was even a glimmer in their founder's eye.  Instead, they had to start the layoffs.

It is possible to turn a commodity into something more.  Google did it with search. Amazon did it with books.  It looks like Uber it is going to pull it off with transportation.  I posit that the difference between these companies and those who are currently floundering in post craze obscurity is this: The successful companies reinvested in differentiating and diversifying their company rather than acting as a catalyst for a steady succession of imitators who strip-mine the market.  They stayed ahead of competitors.  They made their search the best, increased their offerings, and decreased the bargaining power of suppliers. These companies did not assume that they would always have the market on that idea cornered.  They didn't stop developing new products when one succeeded.  They didn't sit idly by and reap their rewards.  Rather, they took a long term outlook and decided early on what they were going to need to do to make the business last.  They constantly tried new things. They never stopped creating.  They were never comfortable staying in one position.  They changed.  They adapted.  They innovated. They dominated.  That is what it takes to transition an idea from just a commodity to a sustainable business.

Ideas are a dime-a-dozen.  Everyone has ideas.  A lot of people have good ideas.  However, a good idea does not a business make.  Turning an idea into a successful and lasting business takes vision, dedication, and the commitment to tranform your idea to a diversified company and differentiated product.  Do the analysis.  Plan for the future.  Stay ahead of the competition.

Diversify.  Differentiate.  Dominate.


Post Script:  In the last week (and subsequent to my writing of this blog), Uber has announced both a new delivery service (new product with existing market) and strategic partnerships which will open its API to third party developers including OpenTable, TripAdvisor, and United Airlines (exisiting product with new market). It looks like they are continuing to move in a strategically sound direction. (http://techcrunch.com/2014/08/20/uber-api-part-deux/)