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5 Reasons to Ditch Diversification and Specialise your Startup

Diversification and specialism.

Both are compelling business strategies. Diversification calls for a plethora of whatever you’re selling, and specialism means you focus on just one or two products.

At first glance you’d think the answer is obvious: diversification. Who would bet everything on one measly product when you could rely on a whole raft of them?

Actually, some of the biggest names out there did just that…

Advantages of specialisation in business

…And It’s the reason they now own their industries.

Take the goliath: Google. Google essentially runs the Internet – seriously, does anyone still use Bing?

Does anyone even remember Yahoo?

Google started out with just Google Search back in 1996. Remember this?

How google used to look many years ago.

How adorable!

All the other cool stuff that we now take for granted came later, years after it had dominated the industry. If it had started out offering everything – Docs, Adwords, and so on – it would have been a tangled, forgettable mess.

GoPro is another stellar example. Their first product was one camera, the 35mm HERO. They made $150,000 in their first year and now you’d struggle to find any camera to compare in their niche.

Those companies offer a raft of products now, but when they were starting out, they had one specialism and they nailed it.

There is risk involved with product focus. If your product tanks, you’re a bit stuck, but a quality business strategy will dodge that outcome and steer towards StartUp success.

The far greater problem with over-diversification in young StartUps is quantity over quality.

Your funding is finite and if you try to crank out too many products, it’s likely that none of them will be spectacular. You’ll be pulled in every direction, unable to perfect anything, and everything will end up just “okay.”

That’s not good enough to survive in the competitive market.

You might be full of ideas, but your first few years of business are not the time to try out absolutely everything. If you’re currently running a Startup and can’t remember the last time you slept and can’t accurately recall the details of all your products, chances are you have too many.

A jack-of-all-trades can do a lot of things passably. A specialist can do their one job to a spectacular standard. In business, specialising is a ticket to industry authority, growth and profit.

Benefits of specialisation

Focusing your business, could have numerous tangible and intangible benefits for your business. Here are five good ones:

1) Company Value

Putting all your eggs in one basket seems foolish, but it means all your resources go into making your one product singularly amazing.

Specialising doesn’t always mean more expensive either – it just means you need to know your product and industry better than your generalist competitors.

Being the standout darling of your industry also makes you infinitely more attractive to potential buyers.

2) Money, Money, Money

You can push up the price of what you offer if it’s your specialism. Sure, you could get a men’s watch from ASOS (who sell anything and everything clothing-related) for £25.00. Or you could get a Rolex for £20,200.00. (Really.)

That’s an exaggerated example, but because Rolex are singularly known for luxury watches and now dominate their industry, they can charge whatever they want. If your product is of superb quality and you’re an expert in it, then you can charge far more than a generalist.

3) Brand Recognition & Saliency


Vacume cleaner by famous brand
By компания Dyson – Фотоархив компании Dyson, CC BY-SA 3.0,

You know exactly what they sell on hearing the name, and you know their hoovers rule the roost. They’re more expensive than their counterparts but they’re a household name.

As a generalist, your company name will make customers go:

“Oh, I know them. They sell, er…lots of stuff.”

Not exactly striking a chord. You don’t want to be vague and forgettable – you want to be the first company people think of when looking for your product. People have short memories – selling one thing and selling it well will stick in their brains more readily than an array of mediocre products.

Owning a niche also means press. If you’re impressive and interesting, journalists are likely to want to get to know you. Work on that PR strategy, you never know when you’ll need it.

4) Achievability

Unless you’ve got bottomless pockets – which most StartUps don’t – you’re going to struggle to finance several products to industry standard.

A core part of a good business plan is to set, achievable goals. There’s nothing wrong with aiming for the sky but you need to actually get there. Spreading yourself too thin will only achieve meagre products that don’t stand up to better funded competition.

5) SEO and Searchability

StartUps don’t come with a household name attached. People are unlikely to be searching for your brand name to start with. They’ll be searching for your product, and if it’s your signature product, you’ll show up far more readily on Google.

Instead of having twenty keywords clamouring for attention, focusing and improving just a few will work far better with SEO.

Benefits of Horizontal Diversification

Is diversification ever a good idea?

With growth comes diversification. Once you’ve outgrown the baby stage of business, diversification might make sense. If you sold hairbrushes, adding hair gel and other products would potentially draw in more customers. Your first product could snowball into a winning brand.

Maybe you’re seasonal and need more than one product to survive the lean months – for example, if you sold gelato, you’d need to think of something else for the winter months.

Conversely, fish and chip shops are inundated all year round.

A single, detailed, tested strategy is the path to StartUp success, not flailing around desperately and offering as many half-baked products as possible.

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