Launching your brand into a new industry carries risk. It also holds great rewards.
Markets with fierce competition force brands to differentiate or die. Although staying within a single vertical makes sense when a company is young, expansion increases brand longevity and introduces new audiences.
Expanding a brand from one industry to another carries major risks, but those risks can lead to significant rewards – if the people overseeing the transition know what to do.
When Facebook bought Instagram for $1 billion, most people didn't understand the move. A few short years later, Facebook looks brilliant, and experts agree that $1 billion turned out to be a bargain.
Brands should evaluate their own opportunities to expand and pull the trigger on promising new ventures.
Our journey of expansion
When we look at outside opportunities, we don't look too far from our core competencies. No one at our brand is trying to break into the biomedical industry. Instead, we lean on our background in software, real estate and hospitality to identify potential avenues of expansion.
According to research published by McKinsey & Company, executives who enter new industries where their core strengths are useful are twice as likely than others to report significant value gains from their ventures.
Starting one company is hard enough. Why plow new ground if you have ready-tilled soil across the street? Think about how your core competencies translate to strengths in other industries. Then, get a head start by bringing old efficiencies into new environments.
As the CEO of Sporting Club, I have worked in many areas, including IT, hospitality and real estate development with outsourced partners for years. These are strategic investments with immense potential value, but most sports businesses tend to outsource these tasks to stay within their core verticals. Our philosophy is different. If resources provide strategic value, we should treat them as investments, not outside expenses.
With that in mind, we formed FanThreeSixty, an internal sports consulting and IT solutions company. This wasn't a big leap; we already had the necessary tools and experience, and expanding into this area helped us gather new data to increase the value of Sporting Club. Each company naturally benefits the other.
After this success, further expansion became a no-brainer. We created a sports-themed millennial entertainment bar called No Other Pub, filling a niche in the food service and concessions business. The bar extends our fan relationship by providing a home location for viewers to engage with our brand outside of Children's Mercy Park.
Our ventures have also led us to the development of our new U.S. Soccer National Training and Education Center, referred to as Pinnacle. The venue will provide coaching and referee training, and it will be a primary training site for U.S. Soccer's national teams and Sporting Kansas City. It will provide state-of-the-art training equipment along with an innovative sports medicine wing to nurture the health and well-being of our players. In addition, through a partnership with Children's Mercy Hospital, it will operate a children's rehabilitation and wellness clinic.
These are natural expansions of our brand that have helped us maximize engagement with our fans and create additional value. We turned our relevant experiences into new opportunities, and our success would have been impossible without expansion.
Tips for expanding into new verticals
You can follow the same path we did to enter new industries and boost the performance of your brand. Follow these steps to get started.
1. Lean on customer data to identify opportunities. Take advantage of existing data to see where customer needs remain unfulfilled. In our case, fan data from ticketing, access control, consumer behavior and points of sale led us to create new ventures.
Follow the data to see where you can expand most easily. According to Gartner, the internet of things will connect 20.4 billion devices around the world by 2020. Every interaction with a connected device or software interface says something about customer behavior. By using that data, you can learn more about everything from your supply chain to your marketing strategies.
2. Get ready to take risks. You spent years cultivating your brand image. To risk that image is to put your livelihood on the line. Depending on your target demographic, however, your willingness to take risks could become even more valuable than the outcome of your new venture.
Consider internalizing outsourced business opportunities if owning those verticals would provide a strategic advantage. When you control more aspects of the outcome, you can deliver better customer experiences and strengthen your existing position in the market. Analyze your strengths and weaknesses; then pursue business opportunities that provide the most impact for minimal investment.
3. Evolve as you grow. After you successfully branch out, don't try to run the business the same way you did when you only had one vertical. You might need to shift your focus from customer acquisition to loyalty improvement, depending on which new verticals you enter. Stay focused on how your new position changes your strengths, and adjust your strategy accordingly.
When you see great opportunities to expand, take them. Your goal is not to dip a toe in the water; it's to make the most of every chance you get.
Don't mistake current success for a guarantee of future growth, however. Markets and customer demands change, and when they do, companies that fail to prepare for these shifts go under. Keep your focus strategic, analyzing opportunities based on how well they prepare your brand to survive future downturns and thrive in booming markets.
Your balance sheet can't tell you when to expand – only your instincts and research can do that. Follow these tips to identify opportunities for growth, expand your customer base, and push your brand further than you ever imagined.