Followers of the Escalate Solutions blog know that we love to offer observations about conflicting dichotomies in business, truths that in theory shouldn’t co-exist but still manage to every day (see Birds of a Feather Flock Together vs Opposites Attract from 10/2016).
One such dichotomy that has traditionally hit particularly close to home for Escalate Solutions and its clients is the ongoing debate between specialization and diversification. Will an organization best thrive and survive if it sticks to what it does best? Or if it explores all of the organic, vertical and horizontal channels available for expansion? And most importantly, which approach best supports growth, scaling and long-term business sustainability?
My answer to these questions used to be, “it depends on the entity and industry“, but now I am starting to believe that these questions are becoming increasingly irrelevant. Just as organizations can provide either a product or a service and be successful – so long as they provide a true value proposition to clients and consumers – when it comes to looking through the lens of strategy, advancements in technology and digitalization are inevitably blurring the lines between specialization and diversification. The complexities of either strategy are now running in parallel.
Predictability, personalization, productivity, people, process and privacy are the new priorities for consumers, regardless of the product or service being offered (or volume thereof). That means that as an entrepreneur or member of the c-suite, it doesn’t matter how many wheels you have spinning. One division/company or twenty, your organization has to operate at an advanced level to thrive and survive. Yes, it is possible to “bite off more than you can chew” with either specialization or diversification, but that eventually can be addressed with the right infrastructure. Even in the most complex organizations, the application of digital transformation and tools like Enterprise Resource Management (ERM) or Enterprise Resource Planning (ERP) are available to streamline oversight and management of all of the critical aspects of an operation (i.e., tools to create and more intelligent business, end-to-end). An organization can be a massive, diverse collection of unrelated entities, but if they maintain the strategy, corporate culture and priorities of more specialized entities, they can make it all work collectively. The enabling of scaling, regardless if any entity wants to specialize or diversify, is one of the more increasingly observed outcomes of Digital Transformation and Intelligent Enterprise.
Escalate Solutions has a value proposition and business model based upon deliberate generalization. We are strategic consultants, which inherently means different things to different clients. Those that engage us – from multi-billion dollar operators to emerging small businesses – all hire us because we can helping growing, scaling and sustaining companies address a variety of functions at any phase of the business life cycle. In other words, we add value because of our diversity. That said, just because we have broad capacity and a variety of services, that doesn’t mean we don’t have to refine our skill sets and expertise within each of our focus areas. We have to specialize each and every day….we just so happen to specialize in a lot of different services.
Until now, history has shown that specialized firms in successful industries are more likely to be survive for the long-term….but the problem with that metric is what happens when that sole industry isn’t as successful as it used to be (ie, Blockbuster, Xerox, Kodak, etc.). The question is especially relevant in our current global ecosystem where advancements through AI, IoT, Machine Learning and other technologies are changing the dynamics of business strategy on a daily basis. One of the outcomes of Digital Transformation, I would assert, is that we have reached a point where the difference between specialization and diversification may no longer actually exist from a complexity standpoint. Even firms that opt to specialize in “what they know best” are being forced to evolve, innovate and advance at such a rapid level, the strategic implications are frankly no less complicated than they would be if they were intentionally diversifying.
Leaders of organizations that are growing, scaling and seeking sustainability can all benefit from a shift in mindset to reflect this reality. If you want to specialize, specialize. If you aim to diversify, diversify. Whatever your strategy, set your objectives around achieving excellence, differentiation and overall digital transformation. With a proper investment in infrastructure and culture, it doesn’t matter how many divisions or companies you operate. It only matters that your organization prioritizes evolution, innovation and advancement. Accept this evolution of the “conflicting dichotomy” between specialization and diversification, and your organization will find you are not only keeping pace with the competition, but creating a value proposition that will set the bar for the rest.