“A startup is not a smaller version of a large company.”
– Steve Blank
Single Product Vs. Multiple Product Companies
Let’s start with a question…
Can you guess what Apple, Virgin, and Microsoft have in common?
Other than being multi-billion dollar companies founded by iconic entrepreneurs.
That’s right – they all have a multi-product portfolio ‘under their brand.
And if you think about it, most companies that are doing relatively well these days, they share that commonality.
Is it about time to call it quit and admit that single product companies are a thing of the past?
The Multi-Product Biz Advantages
But before getting into that, let’s first go and see the why behind many entrepreneurs’ decision to have a wide range of products.
Sounds good to you?
Great, let’s do this…
Advantage #1: Higher customer lifetime value (aka CLV)
Yes my friends, I am, of course, talking about the amount of money expected from a given customer throughout the relationship with him/her.
The assumption here?
Couldn’t be more straightforward:
By strategically creating products that address multiple needs of a given customer group, you automatically raise the CLV.
Which in practical terms means, increasing your turnover by selling more and more to the same people.
Advantage #2: Spread the risk through diversification
This refers to the long-held belief that you should never put all of your eggs in the same basket.
Because as they say, since as with life, in business sh*t happens, having a single point of failure is not only dangerous but in fact possibly reckless.
Take Michael Roddy, for example.
Michael is the owner of a small business that specializes in motion picture lighting for low-budget TV movies, music videos, and industrial commercials.
Why is his story relevant?
Just a couple years ago, his truck was stolen – inside was all of his lighting and grip equipment.
Which resulted in losing his entire business overnight, due to the fact that everything was on that truck.
How do you prevent such catastrophes?
Well, according to ‘the experts,’ you simply have to spread your eggs around and diversify pretty much everything.
As Gyutae Park puts it:
“Diversifying helps you to manage your risk and create a more stable business model regardless of whether you’re in the finance industry or in Internet marketing. If one thing goes down, you have a whole arsenal of other options to keep you alive.”
Their point in a nutshell?
Unless you want to become the new Kodak, don’t overthink it and start diversifying your (business) eggs.
Advantage #3: The insider opportunities factor
The argument here is that…
… by immersing yourself in a field, along the way, many new (insider) opportunities will naturally come your way and some will simply be too big to ignore.
A famous such example?
Here you go – Amazon’s decision to enter the overcrowded supermarket space…
So, with all that said, what do you think:
Are multiple-product firms simply superior by nature?
Wait for it…
Spot The Pattern (The Single Product Biz Formula)
Here you go…
1. The Coca-Cola Company
Current status: Multinational beverage corporation and manufacturer, retailer, and marketer of nonalcoholic beverage concentrates and syrups.
Current product range: Coca-Cola, Sprite, Fanta, Diet Coke, Coca-Cola Zero, Mello Yello, Ciel, Del Valle, Simply Orange, Powerade… and many others.
How Coca-Cola started: The Coca-Cola Company started as a single-product company selling just Coca-Cola (and stayed that way for decades).
Current status: A world leader in innovative casual footwear for men, women, and children with more than $1 billion in annual revenue.
Current product range: Crocs sells a wide range of shoes from clogs, slippers, sneakers, and loafers to boots, sandals, flats, heels, and wedges.
How Crocs started: Crocs started as a single-product company selling just Crocs (and stayed that way for decades).
3. The Economist Group
Current status: The Economist is one of the most widely-recognised and well-read current affairs publications with a growing global circulation of around 1.5m readers.
Current product range: The Economist brand encompasses The Economist, The Economist Intelligence Unit, EuroFinance, CQ Roll Call, TVC, and Ideas People Media.
How The Economist started: No guessing here, The Economist started as a single-product company publishing just one publication (and stayed that way for decades).
Current status: Michelin is one of the three largest tire manufacturers in the world, offering tire solutions for every type of vehicle. It also offers digital mobility support services and publishes travel guides, hotel and restaurant guides, and maps and road atlases.
Current product range: In addition to the Michelin brand, it owns the BFGoodrich, Kleber, Tigar, Riken, Kormoran, and Uniroyal tire brands and is also well-known for its Red and Green travel guides, its roadmaps, and the Michelin stars that the Red Guide awards to restaurants for their cooking.
How Michelin started: Michelin, yes, started as a single-product company selling just car tires (and stayed that way for decades).
Current status: Duracell Inc. is an American manufacturing company owned by Berkshire Hathaway that produces batteries and smart power systems.
Current product range: Duracell manufactures alkaline batteries and speciality batteries and also entered into a brand licensing agreement with Dane-Elec for a new line of products that includes memory cards, hard drives, and USB flash drives.
How Duracell started: Duracell, as you can imagine, also started as a single-product company selling just alkaline batteries (and stayed that way for decades).
You got this!
Win the battles you are in before you take on new ones
Yes, my friends.
All the aforementioned companies ‘started singular’ and only moved onto the next battle when they absolutely nailed that first one.
Mark Cuban has the answer!
“You do not have unlimited time and/or attention. You may work 24 hours a day, but those 24 hours spent winning your core business will pay offer far more. It might cost you some longer term upside, but it will allow you to be the best business you can be…. [So] win the battles you are in first, then worry about expansion into new businesses.”
As for the diversification claim, even though I tend to agree with…
… Warren Buffett when states that “diversification is protection against ignorance,” I am of the belief that:
We should not forget, that empirically, most startups fail NOT because they didn’t diversify enough but instead because either they solved an imaginary market problem or failed, big time, on the execution side of things.
So, what’s my take in a sentence?
Startups, in general, win with focus and not by spreading themselves crazy thin.
Today’s Key Takeaways
– When starting out, less is more.
– Quite a lot of today’s business icons started as single-product companies.
– Win the battles you are in before you take on new battles.
– You’re just a startup; now act like one.
Ok guys, that’s all from me for today.
I hope to see you soon.
“Success demands singleness of purpose”
– Vince Lombardi