Tech Companies, Don’t Be Like a Magpie: Why Chasing Shiny Objects Can Lead You Astray
The tech industry is notorious for its fast-paced and ever-changing nature, with companies constantly looking for ways to expand their reach and attract more customers. One common tactic that many companies use is diversifying their core offerings to serve a larger Total Addressable Market (TAM) and build a larger critical mass of customers. While this may seem like a good idea in theory, it doesn’t always work out as planned, especially for up-and-coming tech players.
One of the biggest risks associated with diversifying too early is that it can lead to a reallocation of resources and a weakening of the team’s focus. Instead of focusing on their core product or service, the team is spread thin trying to develop new features or products. This can be especially detrimental to early-stage companies, which often have limited resources to begin with. In addition, deviating too far from the core value proposition can also result in a reduction in core product capabilities, which can make it harder for companies to compete in their chosen market.
Another common mistake that many companies make is trying to do everything themselves. This can be especially tempting for companies that are just starting out, as they may not have the resources to form strategic partnerships or outsource certain tasks. However, trying to do everything in-house can actually be counterproductive, as it can lead to a limited feature set and a lack of innovation.
So, what can companies do to avoid these pitfalls and stay on track? One approach is to focus on building deep, rather than broad, early on. This means honing in on a specific product or service and making it the best it can possibly be. By doing so, companies can establish themselves as experts in their chosen field and build a loyal customer base.
At the same time, companies can explore strategic partnerships to fill any feature gaps or expand their reach. This can involve partnering with other companies in the same industry or forming alliances with complementary businesses. The key is to focus on creating win-win outcomes that benefit both parties.
For example, a company that specializes in developing software for the healthcare industry might form a partnership with a medical device manufacturer to create a more comprehensive solution for healthcare providers. By working together, the two companies can offer a more complete package that meets the needs of their shared customer base.
Another strategy that can be effective is to focus on nearbound partnerships, which involve partnering with companies that are similar in size and scope. This can be especially useful for early-stage companies that are still trying to establish themselves in the market. By working with other up-and-coming companies, they can share resources, knowledge, and expertise to accelerate their growth and establish a stronger foothold in the market.
Ultimately, the key to success in the tech industry is to stay focused and avoid the temptation to diversify too early. By building deep and forming strategic partnerships, companies can establish themselves as experts in their chosen field and build a strong foundation for long-term growth. While it may be tempting to chase after shiny new features or products, the most successful companies are those that stay true to their core value proposition and deliver exceptional products and services to their customers.
