Not How, but How Far?

Not How , but How Far?

When deciding on a plan for expanding profit centers in a company, I dont think the important question is vertical or horizontal growth. I think the much more important question is: How far? Everyone gets the idea of growing existing product lines either with the same customers or with new customers.

Something a lot more interesting to consider is exactly how far from the current products should you focus your efforts for growth. My view is that you should always stick close to the knitting. If you make blue widgets and have already expanded your products to red and yellow widgets, you should look around for complementary products or substitutes. Resist the urge to get into the framis business just because you heard the margins were attractive.

You will often find that another business is not as profitable as the one that you already have, and it will often take you years to get another product off the ground. The most effective strategy is therefore to concentrate on products that are close to your current offerings.