Smart diversification

May 28, 2001

I was out working in my yard this weekend, cutting brush and chopping up fallen branches with my 18-horsepower trailer-mounted chipper, when one of my friends and clients dropped by. He’s an architect and was enjoying a ride in his vintage Porsche 911 on this beautiful spring day. “Our work has really slowed down,” he told me. “I’m concerned.” This guy has a good little company— young people, focused on a niche, and good at what they do. The problem is that their niche (commercial office build-outs) is down right now. The Boston area is experiencing a real slowdown. We’ve been on a roll, but the shakeout in the high-tech and telecommunications sectors is taking a toll on the office market. It’s just not what it was. People still need space, but a lot of sublease space is coming on the market. And no one feels rushed to make a decision right now. After we made a promise for a lunchtime get-together in the not-too-distant future, I started thinking about my friend’s predicament. Focus is the key. I know that. There’s always someone out there doing work in any given market, even when that market falls apart. You have to be the best. But maybe there’s more to it than that. Being focused is great, but it also helps not to be married to one narrowly defined geographic area when you are that focused on one market. The office market has not fallen apart nationally, but it may be falling apart here. So maybe these guys need geographic diversity. They have never marketed outside of Route 495 (the “outer belt”), and maybe it’s time they did so. But there are other types of diversification that I think these guys (and many of our readers) ought to be considering. I hesitate to bring up the subject of diversification because so often I see A/E/P and environmental consulting firms go off course when they start to think about it. The key to diversification lies in doing the things that are easiest, cheapest, and most likely to succeed. Successful diversification does not mean throwing away the business you have already created, certainly not in the short term and probably not in the long term either. A complete redirection of the company is usually too hard to do, too costly, and too slow. Intelligent diversification allows you to use what you have already created as a platform to build from. Here are some thoughts I have for this particular firm (beyond expansion of their geographic boundaries): New services. If clients aren’t building out new spaces, what are they doing? They may still be making improvements in electronic and communications systems. They may be doing energy studies and retrofits to help offset rising utility costs. And they may be looking to carve off unneeded space and reconfigure the space they’re going to keep. All of these things imply that mechanical, electrical, telephone, facilities management, and business planning services could be good places to diversify beyond architecture and interiors. New clients. Office space is not just used by private industry. Municipal governments, state governments, the federal government, school districts, and medical and educational institutions all have office needs. Why not direct some targeted marketing efforts at some of these other client types? They have the same needs, and this firm could fill them if it made an effort to reach them. That’s something I would be getting on immediately! New packaging. These guys are great marketers. They have been hammering away on the employee-motivation aspects of work environments with some success. They now need to do the same thing with selling space audits to turn up (and turn over) unused office space and reconfigure what’s left over to meet the demands of the current staff. I think there’s a need for this service, and I think they could sell it as a way to save money and reduce overhead for clients that are concerned about that. New focus. If I were these guys, I would be looking to find the top 10 or 20 office space users in their existing geographic market and develop an eight-phase direct mail and telephone campaign to reach every single buyer and influencer in these organizations. These would be the biggest, most successful companies that I could find. They’re still out there. I would find out what it would take to get their business and make a commitment to get two or three of these clients signed up for something in the next three months. These are the future mega-clients, so get a chance to demonstrate competence to them and sell like crazy! There’s always something you can do. The key lies in using what you have to make things better and not wasting a lot of time with hand wringing. It feels good when you are successful in turning things around quickly, and it builds a lot of respect from the troops as well. Originally published 5/28/2001.

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