For small and medium-sized enterprises, strengthening their core business by taking advantage of their own characteristics is the basis of their management strategy. However, the environment changes quickly, and there are risks to proceeding with just one main business.
Therefore, it is important to always explore the possibilities of new businesses while sticking to the strengths of the company. Let's consider the points when SMEs start new businesses.
Why SMEs Need New Business
Many SMEs operate on the basis of specific technologies, products, and services. Unlike large companies that constantly develop new businesses and new products and services, SMEs do not have abundant funds and human resources and tend to maintain their current businesses, products and services.
However, any business will reach its peak of growth somewhere. In many cases, minor changes are inevitable for products and services.
Especially recently, the speed of changes in customer needs and market structure has been accelerating. The need to respond to these changes is the same for both large and small businesses.
Rather, considering the stability and continuity of management, it will be essential for SMEs to be aware of the possibilities of new businesses, including new products and services.
"Products" and "Markets" create new businesses
It is generally said that the business is defined by "market (customer)" and "product (product or service)". A healthy business can be established by properly matching these two.
When considering a new business, the key is how to match the "market (customer)" with the "product (product or service)".
Specifically, there are three possible patterns.
1. Introduce new products to existing markets
2. Introduce existing products to new markets
3. Introduce new products to new markets
Of these, the probability of success is generally highest in (1), and is thought to decrease as it becomes (2) and (3).
1. "Introducing new products into existing markets" is relatively common in the retail, wholesale, and service industries.
However, you should be flexible about what is new. In addition to changing the contents and functions of raw materials, package design, etc., it may become a new product by changing the way of communicating with customers.
It is important to consider whether or not a product is a "new product" from the perspective of the customer, not the perspective of the supply. If there is something that gives the customer an unprecedented added value, it can be a "new product".
2. "Pattern of launching existing products into new markets" aims to expand sales channels to other industries by taking advantage of the characteristics of the products. For example, a company that manufactures automatic transport equipment for factories may take advantage of the safety of automatic stop equipment and develop the introduction to distribution warehouses.
Even if a retailer who has a store in a shopping district and sells it starts EC mail order using the Internet, it will lead to the development of a new market through a new sales channel.
3. "Introducing new products to new markets" is often unknown to SMEs and will be a low priority.
However, there are some cases where this pattern is possible. For example, around 2012, due to the national policy of promoting the introduction of renewable energy, new entrants to solar power generation and wind power generation by companies continued. The new entrants were mainly in other industries than in power generation companies.
However, timing is important when entering a new business. In the case of the power generation business, the entry hurdle is considerably higher now that the purchase price has dropped.
5 Key points for successful new business
There are several key points to the success of these new businesses, not just SMEs.
1. Market Research
I mentioned earlier that the business is defined by the "market (customer)" and "product (product or service)". In particular, in this era, even if a product (product or service) is created only by the convenience or speculation of the company, it will not succeed. Listening to the voices of the market (customers) is the key to the success of new businesses.
2. Changes in the times
Listening to the voice of the market (customers) may be translated into riding the changing times in a sense. Changes in the times create new needs. Capturing that change will lead to new businesses.
3. Vision
Whether it's a new business or a new product, it's important to have a clear vision of "for whom" and "for what." And the vision must have an appeal that many people will sympathize with. If the vision remains ambiguous, not only will it not affect the customer, but it will also cause a backlash from within the company.
4. Network
In the coming era, it will become increasingly difficult to start a new business on your own. The possibility of new ideas being born by gathering different organizations and different members opens up.
Proactively expanding the network with the outside, in addition to the existing business partners, will be an opportunity for new business and new product development.
5. Withdrawal criteria
Whether it's a new business, a new product, or a new service, you might wonder if it's going to go wrong. However, considering the possibility that the actual situation may not be as expected, the criteria for withdrawal should be set in advance.
If you clarify the withdrawal criteria, you will be able to continue the challenge again and again even if you do not succeed once.
Business portfolio perspective
Another thing to consider when SMEs are considering new businesses is the perspective of their business portfolio.
Portfolio is originally a term in the world of finance and investment, and is a method of optimizing risk and return by appropriately diversifying investment targets such as cash, deposits, stocks, bonds, and real estate.
By applying this idea to corporate management and launching new businesses that complement the main business, management stability will increase. Businesses come with risks, but look for new businesses that can diversify those risks.
However, these new businesses are generally more difficult because there are many cases of (3) "Introducing new products into new markets". Among them, real estate investment and real estate management have relatively low hurdles for entry.
Some know-how is required to select the location and type of property, but if you can acquire a property that can be expected to have stable rental demand, you can expect stable profits without much effort in the subsequent business. In some cases, it may be a tax-saving measure for your main business.
Summary
It's easy to think of a new business as an exaggeration, but it can be triggered by a casual word from a customer or a little daily awareness. Polishing existing products and services can be regarded as the development of new products in a sense. Alternatively, real estate investment is an option from the perspective of the business portfolio.
In the coming era, SMEs also want to see new businesses from a flexible perspective and aim to ensure management stability and sustainability.
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