Often when talking to business owners, they are not really sure what is their main business. This may be due to the fact that they lose the trees because of the forest. They are so consumed by everything that is keeping them busy that they don't realize that they may be neglecting to grow their core business. Recently I had a conversation with a successful business owner who is looking at the projected economic acceleration as the biggest threat to his business, which has flourished due in part to the recession. He wants to consider building other businesses that may make him recession proof. In finance we would say, he wants to diversify his portfolio in order to hedge his economic risk. Obviously, this sounds like wise advice. Diversification is good.
As I pondered my conversation with him, I was reminded of another client who also has looked to diversify their portfolio out of fear that they may lose their core business in the future. This company has spent significant amounts of money on ventures that have proven unsuccessful, while the only business that continues to grow exponentially is their core business. I am a believer that businesses need to focus their finances and energy on building their core, seeking new markets, and making the changes that will allow them to push out their competitors. Innovation should occur within their core, (ie. make even better consumer electronic products, add new softdrink formulas, improve your software, even increase your efficiency and quality.)
There is nothing wrong with diversifying or hedging our risk. Simply, we shouldn't allow our new ventures to take our focus away from our core business. I would suggest that we internally diversify and innovate our core business first, and then follow the natural leads where it takes us. Don't spend your time, effort and finances on developing a business completely out of your core based in fear. Look at the opportunities and take them, but don't do it at the expense of what you are best at.