Drills, holes, or both? Walking the tight-rope of diversification

Earlier this month I attended a Design Thinking Bootcamp by the Designthinkers Academy in Amsterdam. One of the speakers was Ralf Beuker, the Dean of the Design Faculty at University of Applied Sciences in Muenster. He talked about how to stay on-strategy when applying design thinking. The danger lies in the phase after doing the proper work, stepping in the shoes of the persona you are trying to serve, map out their journey and then come up with a genuinely solid approach that works. If you've done all that, most likely you will end up with a great solution that is lovely by many. And then the following happens… Inspired by the success of your solution you start to focus on optimizing it, rather than continuing to pay attention to the unmet needs to the people you try to serve. An oft used example is the temptation to diversify what you've made. In line with the original article on mixing up the need for holes rather than drills, Prof. Beuker gave the example of Bosch (or any other tools manufacturer), coming up with one additional add-on for their hand drills after the other.

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Looking for a wine-opener? Bosch has got you covered. The point Prof. Beuker was making was that optimizing and diversifying a productline is not aligned with continuous observation of unmet needs of your customers. The short-term revenue impact is more important. Or is it? Because while it is a very careful balance, you can do both. You can continue to truly put your customers needs frontand center and further develop an existing solution. The wine-lover who also happens to own a Bosch hand-drill is perfectly fine as a persona to build on. It is all about balance of course and as long as you keep your customer, and not the product, in the center of your attention - you should be ok.

Although, there are other ways in which diversification helps server your core customers. Ferrari is an interesting example here. There is very little that you cannot but that does not come with a Ferrari logo on it. Underwear, bed-sheets, pens, watches, and yes, even a Ferrari blowdryer, the logo with the horse is slapped on everything. And they are making a good profit by doing so as Ferrari is one of the world's strongest and most loved brands. But it is again a tricky balance to keep. In Ferrari's case, their message to their customers is that without this branding and diversification extravaganza, they would not be able to invest in R&D as much to develop the cutting edge cars that their core customer base loves so much. As long as Ferrari is transparent about that to their car-buying customer base, they can explain that strategy and it works. But you can't push it too far. Diversification and branding aimed at your core-customer base is even harder. Leica, the photography company with perhaps the most loyal customer base, is also walking the tight-rope of diversification and when it announced, amongst others, a 175 US Dollar key-chain. Even Leica fans were not rushing to defend the brand on the internet's comments pages.

Diversification can work - as long as you can make a genuine connection between the core product you developed to meet that clear need of your core customer base and the extension you developed. Either in the form of utility for the actual core customer base or as a way to drive revenue which in the end, delivers a better product for your core customer base.