In business, diversification can apply both to services and products. Choosing to concentrate on a single product or a single service is a good strategy in the beginning. A startup can concentrate its energy on doing one thing to the best of its ability. But when a company starts to grow, there will be many opportunities to add products and/or services, acquire new clients and enter new markets.
Diversification can help a company alternate sources of revenue if, for example, the original market dries up, stops growing, or is hit by new competition. Most companies that have been in business for a long time realize that they have to develop new revenue sources because both customers’ tastes and opportunities change and evolve.
The Path to Diversification
Diversification has been widely discussed and applied in the translation industry. An excellent resource on this topic is the book Diversification in the Translation Industry (2013). The book collects the experiences of translation practitioners who diversified their services and, by doing so, widened their client base and increased their income.
If you choose to diversify, you’ll find yourself at a crossroads where you choose whether to go toward a vertical or a horizontal diversification.
When going for a vertical diversification of your services, you’ll develop offerings centered around your core competence. For example: if your core competence is technical translation, you might want to offer to write technical documentation on topics related to, for example, using controlled language or SEO techniques.
As for horizontal diversification, when you undergo this process you could develop a variety of services. For example, in addition to basic translation service, you could create cross-cultural training or offer copywriting, copyediting, or language courses for business professionals. You could also partner with other professionals who can provide related services, like multilingual DTP or graphic services.
Diversification: Pros and Cons
Of course, diversification is not as easy as one-two-three. There are some important things to consider.
First of all, before a translator or translation agency can offer new services, they need to either find the competent human resources (in the case of an agency) and/or develop the new necessary skills (in the case of a translator). This could mean pursuing a new degree or certification, thus possibly taking classes. This, in turn, means costs and higher overhead. Before you decide how to diversify, we recommend that you be sure you won’t have to spend more than you stand to make. The safest areas into which a professional can diversify are usually closely related to what they already do, so that there is some existing expertise already available.
Another point to take into consideration are your existing clients. They might not need your new services or be willing to buy them from you. So you need to assess whether there is a real demand before launching your new offering and the competition you might have to face.
Finally, few words about competition: Eluding increasing competition may definitely be a major reason for diversification, but entering a new market — even a niche — is not always easy and you might find yourself facing unexpectedly fierce competition, even fiercer than the one you were trying to avoid. You should be ready to start your acquisition plan almost from scratch.