Diversification strategy
Diversify your activities to de-risk or increase your revenues
For more than 30 years, our specialized team has been supporting companies in their diversification strategy, whether through the development or acquisition of new strategic activities, or through the expansion of their existing activities into new markets.
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The key success factors of a diversification strategy
Diversification can be a strategic way for companies to mitigate risks and to grow by increasing the customer base and market share. However, a successful diversification strategy requires intensive planning and risk assessment to avoid common pitfalls. The main key success factors associated to diversification are to:
Diversification increases the complexity of allocating resources (such as budget, personnel, time) across different areas and can lead to overextending them. This can hinder the company’s competitiveness in any single area, leading to a suboptimal overall performance. Even when performed through acquisition, diversification always requires more resources!
How can a specific diversification strategy be implemented with the current resources? What strategies can be put in place to avoid spreading resources too thin?
Diversification can lead to competition among different segments and can result, for example, in the displacement of an existing product by a new one (product or market cannibalization). Moreover, different businesses can have misaligned priorities and goals causing internal conflicts that can compromise the company’s cohesion.
What are the major threats to the current business due to the introduction of a new product/service as part of a diversification strategy? How can such conflicts be avoided?
Lacking the required expertise and skill sets when entering a new and unrelated market is a significant risk as it can lead to missed opportunities or failures that undermine the effectiveness of the diversification strategy.
What markets can be accessed with the current company’s know-how? What specific knowledge is required to enter the newly identified market?
How we support you in your diversification strategy
Our team support you in developing and acquiring new businesses or expanding your existing businesses into new markets. We work both on strategic reflections related to a desire for diversification and on the operational implementation of the defined strategies.
What they say
"Like a compass, Alcimed helped us determine the fields in which we wanted to develop, in this case biosimilars. Alcimed is our strategic, marketing and operational ally."
Bertrand Mérot
CEO
Examples of recent diversification strategies carried out for our clients
Diversification strategy to go from drugs to herbal medicine
We helped a pharmaceutical company make a strategic decision to diversify their activities in the field of herbal medicine.
This diversification project was based on a study of 7 countries of interest in order to understand both the potential of this field and the possible synergies with existing activities in terms of medical sales, distribution, reputation, production, etc. In the end, Alcimed conducted 2 strategic scenarios allowing a successful entry in this field.
Organization of a multi-sectoral round table around the possible diversification strategies
We worked with an insurance company that, having a niche positioning, wanted to diversify towards new customer segments.
Our client called on our team to overcome the inertia of this strategic subject internally, which had been stagnating for many months. In order to advance this subject and the associated decision making, we organized a round table with five players from other business sectors, who had achieved a diversification almost similar to that of our client.
These exchanges on diversification strategies allowed us to generate inspiration as to the paths that could be taken and to highlight the key success factors and the pitfalls to avoid in this diversification strategy, thus reassuring our client’s management committee on the necessity and the method to carry out this development successfully.
Following this roundtable, we continued our support to help our client finalize his diversification strategy by confronting on the market the three previously identified diversification scenarios, until the management committee took their final decision.
Concentric diversification strategy for a pharmaceutical player
One of our clients, a global pharmaceutical leader, wanted to secure the position of one of its blockbusters facing an intense competition and to diversify its activities by setting up new associated services for healthcare professionals and patients.
In this project, our team first conducted a phase of identification of potential services via a benchmark of hospital and out-of-hospital healthcare services and a study of the unmet needs of patients and physicians in several countries. After this first phase, we evaluated and selected (according to several criteria co-defined with our client) the most relevant services to develop to diversify its activities.
Once the services were selected, we then defined the product and service offer “packs” and declined them operationally within a dozen of subsidiaries.
Diversification strategy in the pharma industry: creating new solutions for real-life data collection
We supported one of our clients, a leader company in the healthcare sector, who wanted to explore the opportunity to diversify its activities through the integration and use of digital solutions for the generation and collection of real-life data (Real-World Evidence – RWE).
For this project, our teams evaluated the different data capture technologies, their characteristics, advantages and limitations, as well as the existing approaches for their use in France in RWE. Following our analysis, we defined four approaches enabling our client to integrate and implement these new services of digital data solutions and we co-built an operational action plan for the realization of pilot projects.
In the end, one of the pilots was successful and our client was able to launch new services to diversify its activities.
Identification of the best diversification strategies for a federation of mobility clubs
Alcimed supported a federation of mobility clubs to analyze diversification strategies adopted by its best-performing member clubs in EMEA and identified the most interesting ones to be recommended to other clubs in the federation.
First of all, our team analyzed the outcomes of a survey that was distributed among member clubs and interviewed members of top-performing clubs. Then, we organized a workshop to share key learnings and diversification strategies with all the members of the federation.
The client received an in-depth overview of strategies and concrete initiatives undertaken by its top-notch clubs to diversify their portfolio of products and services. Moreover, the best practices were shared internally to promote the launch of diversification initiatives by all member clubs.
Implementation of a diversification strategy for the business of an aerospace company
Alcimed helped an aerospace company to define how to better diversify their business.
To do so, our team mapped all possible business opportunities and underlying services offered by other players in the field. Then we identified the most promising ones for the client based on market attractiveness, competition and alignment with the client’s business. Finally, we built an action plan to implement the identified services.
The client received a broad overview of all services offered by other companies and a detailed characterization of the most relevant ones. Moreover, they received a roadmap with the next steps required to develop the most promising identified services.
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Founded in 1993, Alcimed is an innovation and new business consulting firm, specializing in innovation driven sectors: life sciences (healthcare, biotech, agrifood), energy, environment, mobility, chemicals, materials, cosmetics, aeronautics, space and defence.
Our purpose? Helping both private and public decision-makers explore and develop their uncharted territories: new technologies, new offers, new geographies, possible futures, and new ways to innovate.
Located across eight offices around the world (France, Europe, Singapore and the United States), our team is made up of 220 highly-qualified, multicultural and passionate explorers, with a blended science/technology and business culture.
Our dream? To build a team of 1,000 explorers, to design tomorrow’s world hand in hand with our clients.
Diversification often resembles a risk management strategy designed either to limit operating risks (cyclical or seasonal fluctuations, competitors invading the market, etc.) or, on the contrary, to take new risks to create synergies between the current portfolio and new activities.
A diversification strategy consists therefore in the investment of a new area of strategic activity, by acquiring or extending current activities to new geographies or market segments. It is opposed to a specialization strategy.
There are 4 main types of diversification:
- Horizontal diversification, which involves expanding activities to areas that are complementary or parallel to the core business but with the same customer base,
- Vertical diversification, which consists of extending activities along the value chain of the current ones,
- Concentric diversification, which consists of expanding into areas that have technology/marketing-related synergies with existing ones and that target new customers,
- Conglomerate diversification, which consists of adding new products that have no correlation with the current business.