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Walid's Blog

Eggs & Baskets

Common sayings can have the allure of absolute wisdom or truism. But sometimes if you apply and follow without thought, it can cost you (and your business) dearly; and you discover too late that they are no more than ‘good sounding nonsense”.

In this post, let’s look at the common wisdom: Don’t put all your eggs in one basket.

I often hear the ‘egg-basket’ saying when a business owner is defending why they are providing many (many) products or services rather than focusing on (and improving) one or two products only.

This tendency to ‘diversify’ is persistent even when I show them that most of their revenues are generated by just a few of their products/services (see my previous post Listen To The Vital Few).  A common response is then:

‘It is too risky to drop my other products/services. What if my main product stops selling? Then I won’t have anything to fall back on’.

This is where the myth begins and where the illusion of a ‘cushion’ can turn to a deeper hole. After more than a decade in business risk, it is clear to me that ‘specialise or die’ is far more prudent than ‘generalise with the hope to thrive’.

So why do I say this?

By working hard to maintain many products/services you are creating unnecessary (and related) risks such as:

1)     You make it easier for the competition to provide a better product/service and perhaps convince your customers to switch. This is because you are spending less time and resources on improving and fine-tuning your top products.

2)     You face greater competition if you need to rely on your ‘fall back’ products/services.  These are unlikely to be the best in the market otherwise they would have been your top products.  So there is a much stronger competition in the market that has spent far more time and resources on your ‘fall back’ products than you.

These risks mean it is likely that your ‘diversification strategy’ will decrease your ability to stay relevant and competitive and reduce your chances of  putting up a decent fight against able competition.

So when thinking of eggs and baskets remember that what you really want is the Golden Egg.  And this will help you turn the basket into a vault.

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