Diversification- it’s more than just an old, old wooden ship. If there’s anything I’ve learned after my 20 years of involvement start-up companies, including my own, it’s diversification. Diversification is one of those business terms that sounds sophisticated when you say it but still sounds like common sense, doesn’t it? Problem is, common sense isn’t that common. Diversification can be extremely rewarding in your business portfolio, but also very scary. The scary aspect is usually associated with tenured companies that have been very successful doing one thing and one thing well since their inception. The proverbial mantra of these organizations is the old saying, “If it ain’t broke don’t fix it.”
I remember moving to Houston in 1997 when the energy market deregulated. I was an executive search consultant focused in energy. It was like a modern day gold rush for Houston. Everyone in almost every industry was prospering during the next four years until Enron’s 2001 debacle. Houston’s energy sector was not only crippled for about three years after that, but it also changed the way Houston and the rest of the country did business, e.g. Hello SOX! But that is not what I’m writing about today. Contrary to popular opinion, Houston did have other industries besides energy and oil & gas. In fact- healthcare, insurance and property management were huge at that time. Like a lot of us in Houston we thought the boom would last forever, I was once a Chicago commodity trader and there is an old saying, “pigs get fat, hogs get slaughtered.”
The moral of the story is always take advantage of spikes in the economy, but always be looking for diversification into other verticals because nothing lasts forever. There are other ways to diversify your portfolio besides entering, selling or manufacturing into other verticals. You can invest into emerging technologies that will enhance your company’s productivity. You can invest into efficiency tools that will allow you to streamline the way your company does business. So even in upturns and downturns in the market, there is always an opportunity to sharpen the saw and never put all your eggs in one basket!