Businesses reinvent themselves all the time. The reasons for such upheavals vary, but it might be because the original market became irrelevant, competition became too fierce or technology turned a once profitable product into a commodity. No matter the cause, business leaders facing tough times either adapt their business to the new conditions or they go out of business.
History serves up quite a few examples of successful makeovers: Berkshire Hathaway was a textile company that Warren Buffett invested in back in the 1960s. Buffett gained a controlling interest in the firm and turned it into a holding company for his billions in global investments after the U.S.-based textile industry declined in the 1980s. Royal Dutch Shell traces its routes to an antiques store in the 1830s that imported and exported items from the Far East, including seashells. As the combustion engine became more common, those imports expanded to include oil, and the company built the first bulk oil tanker. The antiques are long gone, but the company’s name is visible on thousands of gas stations around the globe.
Think where these companies would be if they had tried to hang on to their original business. American-made textiles declined precipitously as cheap Asian goods flooded the market. If Buffett had tried to keep Berkshire Hathaway operating as a textile company, you probably wouldn’t know his name today. And imagine if Shell was still dealing in exotic shells, silks and spices in addition to the oil business. Doesn’t make a lot of sense, does it, especially when the profit in the latter would dwarf the former? Why keep selling things that aren’t related to your core business anymore?
Those are questions you should constantly ask yourself. If you are moving toward a new market, are you still holding on to the equivalent of the antiques business? Before you can truly move your business forward into a new market, you have to let go of the past.
This can be hard to do, especially if you’ve spent years profiting from a particular market. You’ve seen ups and downs before, so why walk away when things might rebound?
The answer is simple: You can’t serve multiple masters. You need to focus your business on the market with the highest growth potential and not divide resources among different priorities. Just like Cortez, you have to burn your ships, eliminating the option of retreat so everyone is focused only on the advance.
Letting go is never easy, but if you hope to be the next Berkshire Hathaway or Royal Dutch Shell, the market you started in may not be the best one for future growth.
Fred Koury is president and CEO of Smart Business Network Inc., the publisher of Smart Business Magazine and operates SBN Interactive, a content marketing firm.