Blurring the Boundaries of Business

Product Extensions

Businesses and brands are getting into categories out of their core

The Amazon Kindle set fire to the tech world. The pricing is exciting and the features very good. But what is an online merchant/ retailer doing with an electronic product?

A few years earlier, a software/ hardware manufacturer Apple had turned the music industry on its head by creating a gadget (iPod) which made listening easy but more importantly, turned the distribution of music on its head. If that was not enough, Apple extended the same innovative thinking into a phone. The question was then what is an HW/SW company doing with the phone? I don’t think that warrants an answer now!

The IT space has seen a transformation of sorts. IBM is a software services firm. Dell transcends both hardware and software and HP is confused. Consulting major Accenture has IT services and BPO wings.

Starbucks faces its biggest competition, not from Caribou or Costa but McDonald’s and Dunkin Donuts. What’s a burger brand doing with coffee? McCafe, and I am told that they make a good cup of coffee.

In turn, McDonald’s faces its biggest threat from a brand that sells chicken – Col. Sanders creation – KFC aka Kentucky Fried Chicken which had its name shortened to expand into other categories than just chicken pieces. KFC sells some interesting burgers and other eats which directly takes the Big Mac head-on.

If that was not enough, many brands especially in the premium and luxury space have transcended from their parent category to others. Benetton, FCUK, Nautica etc. has watches, footwear among its product portfolio. Even in the formal/ semi-formal space – CK, Louis Phillipe and others have transformed themselves into a wardrobe brand than just apparel.

Closer home we have many examples especially within large corporate houses both out of necessity due to the erstwhile license raj and now out of choice. Be it the Birla’s or Tatas, they have their fingers in various businesses. The Birlas incubate new businesses through the existing ventures and then later spin them off.

The list is endless and I can fill a few pages on how brands have been extended into various categories. Al Ries will probably have to relook at his book “Focus” and probably have to rewrite his book. Core Competency is damned, sorry Mr Prahalad.

The hunger for more is what keeps business growing and this hunger can drive organizations to take turns that are not a part of the core business. Some succeed and some don’t.

While I do believe that Focus is important, given the dynamic nature of business today it has become important to look at alternative areas to grow. But as they say ‘ the grass is always greener on the other side and this can result in mistakes which are detrimental to a company’s growth.

All organizations cannot be an Apple or even a 3M. Interestingly organizations like these have a strong innovation-led culture with healthy risk-taking ability as a part of their DNA. This helps the organizations to adopt and adapt depending on the environment.

When the boundaries of business get blurred, organizations lose focus and a confused message goes out both internally and externally. Quite literally – a blurring of vision. A clear case is Starbucks which had to go back to its roots and stick to its core – coffee. And they soon got their customers back!

My take on this. As far as possible each new venture should be treated as a separate company with a separate team otherwise there would be a tendency to carry the baggage of the past which cloud the venture itself. IBM is a good example – the software services arm was different from the HW division.

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