Part 1 of the series, Diversification: The Art of Creating Unique Value

 


Diversification – a risk-reduction strategy that involves adding product, services, location, customers and/or markets to your company’s portfolio to set you apart from the competition.


In life, some people strive to blend in. Not attention seeking or sometimes even wanting, they prefer to hang back and observe. That’s fine for your personal life, but in the world of business, blending in is not an option. You either find a way to stand out or you fade into the background.

Diversification in business is all around us. In the U.S., people are trying out the relatively new online grocery shopping trends where shoppers can select items via their device and pick them up at a scheduled time at their local grocery store without even getting out of the car.  While some may still enjoy strolling the aisles and selecting groceries on their own, online grocery shopping can be appealing to people for many reasons:

  • sick/tired
  • rushed (saves at least 45 minutes)
  • multiple children clinging to a cart
  • hate grocery shopping
  • don’t want to spend on random items that entice you through the aisles

While online grocery shopping experiences are still a relatively new experience in countries like the U.S. and Germany, other countries are all on board (South Korea, China, Australia and the UK, to name a few). A new report from Forrester Research estimates that online grocery spending around the world, worth about $150 billion last year, is set to double in the next five years, reaching $334 billion1. This new model for grocery retailing is an example of successful diversification among numerous players worldwide.

 

The Many Faces of Diversification

Diversification in business is essential, but it can take many forms. Here are a few examples from everyday brands:

  • Leverage Current Capability to Provide New Service
    • Uber Eats
  • New Entrant/New Business Model
    • Meal Kit Delivery Services, such as Blue Apron (U.S.), FreshDirect (Asia Pacific), Hello Fresh (Europe)
    • Airbnb
  • Same Product With a “Twist”
    • Food & Beverage: Peanut Butter Oreos, Blue Cheese Doritos
  • Acquire and Improve Processes
    • Amazon’s purchase of Zappos
  • Transform Current Product
    • Coke à Coke Zero
    • iPhone à Apple Watch
  • Expanding Services
    • Costco (membership-only retail warehouse, often used for buying in bulk) offering travel
  • New Channel and New Product Line
    • Amazon purchase of Whole Foods

Now, most of us can also name several companies that did not diversify or failed to follow the shift in usage behavior or trends, and are now are closed for business or whose share is significantly reduced. Here are a few that come to mind:

  • Blockbuster – Did not follow move beyond brick and mortar to online option with monthly fee
  • Polaroid – Did not follow move to digital cameras
  • Borders Books and many other brick & mortar bookstores – Consumers’ demand for digital books made actual storefronts difficult to maintain
  • Blackberry – Clung to the keyboard phone instead of moving to smartphone

In the fast-paced, ever-changing world of business, diversification is rampant. Join us on the journey. In this series, we will explore diversification, specifically as it relates to the fiercely competitive world of online travel agencies. We’ll learn about the reasons and avenues for diversification, as well as outcomes, lessons learned and future thinking.

OTA Pioneers: Trendsetters In the Travel Industry

The online travel revolution began in the mid-1990s with companies like Travelocity and Expedia, with Sabre technology powering many of them. Today, OTAs possess 17% of total travel market.2

This new means to search and book travel brought disruption to the brick-and-mortar travel industry, and so the evolution of the revolution started.

Worries for OTAs Today

Jump ahead 20+ years: the players abound and are diverse. Online travel is a technology-forward, dynamic channel focused on bottom-line bookings and customer retention. These factors, compounded by the concerns below, keep OTA leaders up at night:

  • Smaller OTAs often lack resources to keep up with the evolution of technology and its implementation
  • Direct channel competition
  • Customer acquisition and retention
  • Balancing product mix with profitability
  • With established large players, market share may only be available via niche services/products
  • Online travel is “omnipresent” versus brick and mortar
  • Agility is expected with changes in technology and competition
  • Constant disruption

 

Customer Expectations Are High

In this day of 24/7 service and personalization, customer expectations are high. They demand:

  • Seamless experience
  • Immediacy
  • Consistency
  • Innovation
  • Easy UI and overall experience (otherwise move on!)

It’s easy to understand why OTAs can’t afford to blend in. Stay tuned for Part 2, which will explore how a popular OTA player made a big leap (perhaps hop 😉) into the OTA pool. 

1 “Online Global Grocery Shopping To Double To $334 Billion”, Marketing Daily, March 30, 2018. https://mediapost.com/publications/article/316909/online-global-grocery-shopping-to-double-to-334-b.html

2 Phocuswright, Phocal Point, Global Market Sizing, March 2018.