To De-risk, Diversify

‘Don’t put all your eggs in one basket’. Most companies swear by this phrase in the software industry today. The mature companies are expanding their market and exploring the existing products whereas the emerging companies strive for a wider portfolio with a gamut of products catering to multiple needs of the customers. The strategic shift of the companies from a single or few product / solutions to an array of products/ solutions demonstrates the focus on risk mitigation. The companies are constantly innovating and developing products to be at par with technology, gain competitive advantage and increase the predictability of revenue. One aspect of profitability gaining significance is the increase in revenue streams to augment the opportunity in the existing market and open doors in the unexplored market. This reduces the reliance of revenue from one product/service and there is an alternate arrangement for growth and disparate income, result of a wider portfolio.

Considering the transaction costs and the investment required in developing a new product, companies are now looking at an extension, version or division of the existing product to enhance the product and fit the requirement scale of a larger customer base. Extension of the product would mean the enhancement and improvement of the existing product to suit the current market need and technology. Versioning the product could create a market for the product at multiple levels. A comprehensive product is separated and developed into individual products to facilitate the ease of selling and quicker revenue generation. Though a risk mitigation strategy the company has to constantly drive these products and evolve itself to excel and compete.

Discovering a new path to growth is a well known risk mitigation approach by most of the informed and vigilant companies. Re-examining the path taken and exploring new avenues to growth is a strategy to look out for. Companies need to have a broad perspective and bring out the best in what they have to offer to ensure consistent revenue and increased profitability.

Pratibha Sharma