Why Too Much Diversification Is Bad Thing

Diversifying your investments as well your products and services can help you to tap into a broader market share, it can help to reduce your financial risk by spreading it over multiple ventures, and it can help to grow your wealth more quickly.

But, too much diversification can be a bad thing. It means that you reduce your laser focus on the thing that you do best (and what makes you unique). While you may gain a broader market share, dappling in too much may leave you or your company too focussed on the peripherals so you’re unable to deeply penetrate any of those markets.

Learn from market leaders who are re-focussing on their UQ Factor – their core business

It’s time to follow the market leaders and focus on your UQ and on core business things such as culture, operations and leadership development. BHP and Woodside Petroleum scrapped plans for investment and cut costs by focusing on core business strategies. Rio Tinto’s new boss Sam Walsh has been very active in his short term as CEO and has cut capita spending and taken action against poor investment decisions such as the acquisition of coal assets in Mozambique, Alcan in Canada and now domestic coal services such as Coal & Allied.

Coal & Allied was only purchased 18 months ago but Rio is looking to diversify its holding and sell a 29% stake in the business which operates mines in the Hunter Valley, along with its Blair Athol and Clermont Mines in QLD.

Cutting non-core projects and services allows Rio Tinto to focus on what it is best at (its UQ factor).

Focus on your UQ – the thing that makes you unique

In a crowded marketplace, it’s imperative that you stand out to survive and thrive in business. To stand out, you must be unique. Whether it’s the way you think, act, or communicate, focus on that one thing you do best in order to drill past the surface of your market and deep down into the foundations of it.

What areas of your business or investments are taking up lots of energy with little return? What is your one thing that makes you unique and how can you leverage that to stand out and achieve a deeper market share?

Sometimes, closing a door can open up new, bigger opportunities.