Diversification is a strategy to achieve business growth by introducing to the market new products, services or features. Above all, organizations diversify in order to boost the bottom line. By magnifying customer reach and interest, they can tap into new sales avenues and improve profitability. However, diversification is also a proven way to mitigate risk, enhance brand image and outperform competitors. As the APICS Dictionary explains, diversification strategy involves expanding business scope, with a key objective being to spread the company’s risk over several product lines.
One of the most famous examples of diversification is Disney going from children’s cartoons; to theme parks, resorts and cruises; and, ultimately, an entertainment industry titan. “Of all of the legacy media brands — The Walt Disney Company, Sony, Paramount, Universal, Warner Bros. and FOX — Disney has the greatest variety of entertainment assets,” Tom Nunan writes in Forbes. Its filmed entertainment segments include broadcast and cable networks, a film studio, animation, Lucasfilm, Marvel, Pixar and the booming new Disney+ streaming service.
Nunan says Disney’s “enviable galaxy” of beloved name brands and franchises, all wisely integrated, is a virtual master class in revenue exploitation.
Another well-known example comes from Sharp Corporation. In the early 1950s, company leaders decided to leverage existing strengths in radio manufacturing by moving into televisions and microwave ovens. According to the Harvard Business Review, Sharp licensed the necessary TV technology from RCA and developed its microwave expertise by collaborating with Litton. About a decade later, it diversified again — this time into the electronic calculator business — by buying the technology from Rockwell. More recently, Sharp spent $21 million to build a large-scale-integrated-circuit factory and a central research and development lab to break into the semiconductor business.
These are all interesting examples of what a Business Matters article describes as a company making a “calculated move to an adjacent square” where it can leverage its existing expertise, rather than taking a leap into the unknown.
And now, a new calculated diversification move — this one related to supply chain — comes from Prologis. The global logistics real estate company is expanding beyond its traditional services, as the warehousing industry continues to grow at an astounding rate. Prologis leaders are hoping that innovative peripheral services will offer tenants the amenities they need — from both a functional and a financial perspective.
One of these peripherals is the option for tenants to buy green electricity generated by solar panels on warehouse roofs. This can help tenants reach their environmental, social and governance goals while cutting energy bills. Prologis will also offer equipment for rent, such as forklifts, racking systems and generators. In addition, The Wall Street Journal reports that the company is investing $135 million in robotics and logistics technology startups to offer those solutions as well. Of course, automation is especially critical now as warehouses struggle with an ongoing labor shortage.
Branching out for best practices
In an effort to close this talent gap, Prologis also has partnered with ASCM to develop a first-of-its-kind certificate program that trains people in the basics of warehousing, distribution, inventory management, packaging and shipment, and much more. The ASCM Supply Chain Warehousing Certificate program is an excellent career move for those new to the field; for entry- and mid-level workers; and for those already in sourcing, purchasing, supplier relationship management and similar areas.
By cultivating the next wave of highly sought-after warehousing professionals, ASCM and Prologis are providing yet another value-add. But above all, helping people secure rewarding jobs is perhaps the best kind of diversification there is.
