As companies achieve scale and evolve over time, many begin to think about opportunities for new revenue streams as a way to scale quicker or remain competitive. You might feel you've tapped your existing customer base and there is little room for growth there or perhaps you've identified another problem you might be able to help your customers solve.
While many brands have gone on to expand into new areas successfully, for others it can spell disaster. What makes one brand succeed and another meet their demise as result of chasing a new revenue source?
Often it comes down to unrealistic expectations and not enough market research, which ends up skewing the roadmap (if one exists at all). With that in mind, there are ways to help ensure the resources you put into the new revenue stream is worth the investment.
Knowing where to expand
There are plenty of examples of brands that have successfully introduced new revenue streams, such as Quicken Loans with Rocket Mortgage, Disney venturing into media networks, Airbnb launching "experiences," Uber expanding to Uber Freight, and the list goes on. Each had different reasons for doing so whether it was to enhance the customer experience, solve a problem or improve on something existing. But each had a goal and why.
What is your why and what is the end goal you want to achieve? With that at your foundation, it will be easier to not only gain internal buy-in, but also identify what direction you want to go and how to get there.
You might find there's opportunity to refresh what you are already doing rather than take a 180 into something completely new. That could be "productizing" a service, introducing an ancillary service that solves an additional pain point of your current customers, or digitize an existing product or service.
Assess your resources
Realize this endeavor will require an investment of time and resources. Do you have enough of both?
In terms of resources, I'm talking working capital and people. Is your team equipped to build out this service line or product, and more importantly do they have the time?
If not, can you outsource it? And what will it cost to outsource it?
Map out the entire path of what it would take to launch this entity, service line or product from the initial market research, to testing and validating the concept, to actually building it and then through to marketing, selling and fulfilling on it. Will your current infrastructure allow for this or will you need to pull in outside expertise?
Also consider, the size of your organization will factor into how long it will take to introduce something new. Often it will mean some adaptation will have to occur, and new processes developed and implemented.
Before you build, legitimize your assumptions
The good news is, particularly if you are looking to target the same set of customers, chances are you already have a good idea of existing pain points and how to market to them. But don't assume just because you've been serving a particular customer base you know what they want.
Research, test and validate your assumptions before you begin building. You might uncover new, unrealized opportunities or identify ways to tweak your new venture to make it more successful.
One of the most well known examples of this is Amazon. What started as an online book store has morphed into so much more -- digital services, retail grocery, inventory distribution, robotics, and the list goes on.
Some of these new revenue streams developed out of identifying new ways to service existing customers while others were purely to expand into uncharted areas for the company. But one thing to point out is they started more organically, first expanding the products they sold online beyond books. They worked on getting that right before launching into the next revenue stream.
Build the structure
Creating a roadmap or blueprint for this new revenue stream is mission critical. This is where you'll identify not only what to build, but how to do it and who will be responsible for specific components of it.
In developing the structure, you'll also uncover where you may need to make investment. For some companies, that might be human capital, and for others it might product development or innovation. Get real about where you are strong and where you may need to fill in the gaps, then get to work slotting in how you will go about doing that.
In drafting the blueprint, you might find the new venture is not worth the investment or you simply don't have the resources currently to pull it off. If that's the case you might explore opportunities for partnership or even acquisition --sometimes this can be the most cost effective and fruitful route.