Paradoxically, companies – leaders in the output of the adjacent areas of risk more total. Their core business is at risk if a significant shift in the wrong direction, or a related premature abandonment of a key area. And the risk is aggravated by too many choices, constantly same investment banks. During the discussion of the possibility of expanding into adjacent areas, Sir Christopher Gent, ceo Vodafone, said that the directors should be judged by the opportunities that are being rejected, but not for those who accept. Expansion in adjacent areas for the company’s leadership brings to mind the famous dictum of Napoleon:
“The biggest danger comes after a victory.” At the other end of the spectrum are companies with weak competitive position or contracting for them to key markets, and whose management wants to just jump to another position or in other businesses. Nevertheless, the data indicate that very few second-tier companies are able to change its position over time – no more than 5 percent. A typical example – Budget Rent a Car, once the number six on the U.S. market for car rentals. Since 1986, the business has had five different owners and five different strategies. Some of these strategies have assumed yield in adjacent areas, such as cars travel (unsuccessfully) to buy the company or Ryder truck (number two on the freight transport market after the U-Haul). But the rescue never came. In 2001, loss of $ 7 million on revenue of .2 billion. In 2002, the company declared itself bankrupt and was bought for a knockdown price corporation Cendant, and then merged with Avis. Another situation where the whole industry is becoming unstable. During the 70’s only 10 to 15 percent of economic sectors have experienced significant changes under the pressure of high-level competition. In 90 of their number approached 50 percent, with huge volatility in the industrial sector, finance, publishing industry, air transport, trade and many others. Instability can take various forms. One option, when the whole sector for some time been protected, and then abruptly disappeared protection. Example – deregulation of the utility sector in the U.S. in the 90’s, after which many companies at once rushed into this area. Another option, a rare but extremely unpleasant – the death of the market. This occurs when the entire industry or market themselves in zone of sharp structural decline. A famous example – the displacement of typewriters word processors.
Production of magnetic tapes gave way to store data on optical media, and film – digital photography. In each of these situations, companies such as Imation (data storage) or Polaroid and Kodak (photo) faced strong need to migrate to adjacent markets that served them a bridge to a more stable future. Each of these situations – from strong leadership to the simple movement “in line” with the growing market before dying – has internal and external motivations for companies to move away from core business and get out into the adjacent area. Exception, of course, is a company – a strong leader at a stable or growing market. However, we estimate that only 12 percent of companies are beginning to seek ways for a healthy and profitable growth, with similar beneficial circumstances. The majority, nearly 90 percent there in less than ideal conditions.