The dependence on individual target groups and customer groups is a major challenge for many companies. It is often the result of a lack of business field development. If companies only have a few customers, they become dependent. As long as business is booming, everything is fine. If the top customers change their strategy, the company is quickly on the brink of collapse.
This is a particular issue in the tightly organized, efficiency-driven automotive industry. And not just since Porsche and Varta. Harman Becker, Schlecker, Hirschvogel, Edscha and Mönninghoff have already experienced something similar.
But automotive is not the only problem child of this development. The situation is similar in machine tool manufacturing, mechanical engineering, aviation, electronics production and many chemical production companies. Strong dependence on a few customers. Good sales and margins. Little diversification. Playing with fire.
Business field development is a strategic necessity in order to escape dependence on individual customers and sectors. Put less risk on one card for diversification and more security. In bad times, when the market is depressed, or in good times as a forward-looking entrepreneurial move. Successful companies regularly explore new business areas, such as the industrial company Isabellenhütte, the automation group ABB, the component and application technology manufacturer Böllhoff and the cable manufacturer Lapp. Similarly, Nokia, Preussag, Mannesmann, Samsung, Lamborghini, Siemens and BMW have frequently changed their business areas and previously earned money in a completely different way. The following guide shows in 10 steps how business field development works.
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New business areas are not created on a greenfield site. They are always an addition to the existing business and must fit in with the market and industry environment. The more existing capacities, resources and skills are utilized, the faster the new business area can develop.
But sometimes the existing structures are also a drag. Operational blindness, rigid bureaucratic regulations and processes create efficiency, but hinder flexible and fast action. In such cases, it helps to set yourself apart from the existing business. The image of the “fast dinghy” that sails ahead of the tanker is often used.
The best future business field looks different for every company. What the objective is significantly influences which direction makes sense and what would be a dead end in terms of business field development. There is no universally valid “good strategy” for business field development. There are certainly guidelines.
Not every organization can and wants to go from being a rubber boot manufacturer to a producer of cell phones. Or from a steel company to a travel provider. In many cases, the goals are much closer and it is about diversification rather than starting from scratch. The highly praised adjacent markets (adjacencies) are quicker to reach and less risky. Each organization determines individually which goal is actually to be achieved.
Search fields for business field development can be very diverse. It is not possible to compare all conceivable options mathematically. Identifying the best growth opportunities is therefore an important step that cannot always be done scientifically. Emotions, preferences, experience and power structures within the company play an important role.
It often takes years to really understand a new industry. In business field development, it has to happen faster. You don’t have the time to think about every topic for a year. In just a few hours, it must be clear how the market works, who the players in the value chain are and what challenges there might be. On this basis, the team makes a preliminary selection of the business areas in which potential should be explored.
Questions to understand industries
Every idea in the heads of managers, experts and business area developers is just that. Just an idea. To become true potential, it needs a reality check. On the market. Live. With real people. Often this means cold calling, leaving the comfort zone, sweaty shirts at 9:30 in the morning. Only with real feedback is it worth even thinking about a business case. However, the term ‘business case’ should be used with caution here, as it is actually only a market potential. At this point, a business case often lacks detailed solution concepts, without which we know nothing about the cost side. And without the cost side, there is no business case!
Different approaches to validate market assumptions
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Back from the market, the team brings back potential, enthusiasm and disillusionment. Some things were as expected, many unexpected. A solid quantification and evaluation of the findings provides comparable potentials as to which business areas the company could move into. With the associated opportunities and risks. The decision is made by the company management (for example in the Basecamp workshop).
In addition to the company management, the joint involvement of the sales technicians is crucial. After all, it is often the tensions between these two business areas that make it difficult to make progress in the new business field. Not because one party is right and the other is wrong. Simply because there are different incentive systems, preferences, experiences and mindsets. This can be resolved at this point.
Frequent criteria for the preselection of search fields
Whether just one word needs to be changed on the marketing brochure or completely new solution concepts need to be developed. Implementation planning specifies what the path into the new business area should actually look like. The complexity of the project determines whether Business Development simply writes up the answer ad hoc. Or whether a separate innovation team spends a few months working on how the identified challenges in the target market could actually be solved.
Up to this point, many things could still be done with play money. Now it’s time to get down to business. Real development costs, a real marketing budget and the first orders for long lead times, raw materials, semi-finished products and service providers. Most industries are very familiar with this in the classic hardware business. If the new business areas also mean new business models or digital services, then the need for support really starts here.
Frequent questions in this phase of business field development
In reality, everything is different. Even the best validation of the problem, the market potential and the future solutions cannot hide the fact. The market is the market. Everything else is and remains just assumptions. Observation, measurement, further development and countermeasures are therefore urgently required in order to actually tap market potential to the desired extent. And ultimately, markets continue to develop and are rarely completely identical after market entry as they were at the time of exploration and validation.
Important aspects of ongoing adaptation in the new business area
After the game is before the game. The same applies to business field development. Every business area has to assert itself against the company’s other opportunities to generate income. And the decision may be to continue simmering on a low flame, to end the excursion into the new business area or to strengthen, increase and scale the business.
Business area development is a lot of the things that companies do every day anyway. Evaluating strengths and weaknesses, planning campaigns, marketing, development, sales. The things you don’t do every day are exciting. Thinking about what you are actually good at, approaching people outside your own bubble, being clueless and making that known and simply trying things that you wouldn’t actually dare to do. The result is worth it in many ways.
Business area development strengthens the entrepreneurial thinking of the company’s specialists and managers like no other approach. And it strengthens the company’s chances of remaining successful on the market. Once the comfort zone has been overcome and the toad has been swallowed that business field development eats up capacities that could actually be used to generate sales and margins, then hardly anything can go wrong. Unless the market is developing faster than the organization or the company is constantly betting all its pennies and hopes on the wrong horses.
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The industrial business of tomorrow and the day after tomorrow is what drives TOM SPIKE. With a clear focus on innovation, new business areas and the business of tomorrow, we support ambitious managers in B2B, industry and technology companies. Depending on the objective, budget and need for support, TOM SPIKE accompanies the overall project success, standalone workshops or individual coaching for teams and individuals.
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