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Can't Be a One-Trick Pony: How to Diversify Your Product Portfolio

Truth is, it's hard to rely on one core product or service. Diversifying your product portfolio can prepare your business for the unknown. Here's how to do it.

One-trick ponies rarely survive for long in business.

Creating sustainable growth around a single core product or service line becomes increasingly difficult as your business matures and the market around you changes.  New competitors, changing customer behaviors, technology disruptions, and a host of other drivers all can put significant pressure on a core product and begin to eat away at your revenues and profits.

One way to hedge against unforeseen disruptions to a core product is to diversify your product portfolio.  But how do you decide how and where to expand? The best way to explore new product lines and business models is with a test-and-learn approach.

Before you decide whether to build or buy your way to growth, it's important to conduct an assessment to determine the viability of your ideas, then construct a pilot to test the ones
that hold the most promise.

We are working with a client facing this challenge.  They have identified a potentially attractive adjacency, but are unsure how to build a position in that market.  They are leery of over-investing and destroying significant value.  They need to test-and-learn.

Therefore, we want to follow a very lean and pilot-oriented approach to the market, so that we can evolve our offer and thinking before we invest heavily behind it.  We are setting up a number of market surveys and pilots, to answer several key questions:

  • -Who is our target customer?
  • -What potential target segments are neglected by current competitors?
  • -What operating model would best and most profitably serve those customers?
  • -What is our product plan (e.g., "create the door swing" offer, starter product, 2nd product, full suite) and cross-sell / up-sell strategy?
  • -What marketing messages should we convey?
  • -How do we differentiate from existing competitors in this market?

Our basic approach to some of these questions is to:

  • -Survey customers to establish ingoing hypotheses about, e.g., segmentation, needs, marketing message, route-to-market
  • -Test those hypotheses with a low-cost pilot, where we take resources (people, offices) already in-market and "borrow" them to test a new offer with a limited set of customers
    • -In essence, offer them "concierge" service, with a very manual, high-touch process
  • -Iterate on our hypotheses and offers based on what we learn from the pilot; conduct additional pilots to hone in on a winning offer / message / operating model

One we have tested your ideas and finalized the right mix of products, services and business models, we will be in much better shape to build a strategic roadmap with the confidence of earning a strong return on our investment--and a better foundation for sustainable growth.

How have you approached the test-and-learn process with new business models?  Please let us know your thoughts at

IMAGE: Getty
Last updated: Jul 2, 2013

KARL STARK AND BILL STEWART | Columnist | Co-founders, Avondale

Karl Stark and Bill Stewart are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree.

The opinions expressed here by columnists are their own, not those of

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