Serving the Teesside Business Community | 39
The Business Buzz
With award-winning
writer Harry Pearson
Cross your heart
and diversify
Diversification - the link between the Cross Your Heart
bra and a space suit? Or ice cream and sausages?
E
lsewhere in this issue of Tees
Business you can read about
how Teesside company Mandale
successfully diversified from making
snooker tables to building houses. Personally
I can see the inherent problem with snooker
tables – they last for decades and never need
updating.
Imagine if Apple or some other tech giant
had invented snooker. It would be quite
different then, wouldn’t it? You’d have to
throw your old snooker table out every three
years and replace it with the latest snooker
table or risk having your mates come round
and start pointing at it, sniggering and asking
funny questions like, “Does it run on coal,
then, eh?”
I should say that when it comes to mobile
phone technology I have resolutely stuck
with a 30 quid Nokia 216. This causes much
mirth amongst people my own age, but I
have noticed that it gains me great respect
amongst the young folk.
When I mentioned this to my daughter,
she laughed and said, “That’s because those
button-phones are the ones drug dealers
use.”
And there was me thinking those spotty
youths in hoodies simply respected me
as a man taking a dignified stand against
technological-update oppression. And no, I
can’t sort you for whizz.
In case you think I’m straying off topic a bit
there I should add that Nokia, like Mandale,
are a great example of diversification
because the Finnish telecom giants began
life back in Victorian times manufacturing
paper.
Since people used Nokia’s paper for
writing letters and printing magazines and
newspapers, you could say the firm were
part of the communications industry even
then.
Tenuous, I agree, but business people
will tell you that there are two types of
diversification: related and unrelated.
Unrelated diversification, which takes a
company away from its core competencies,
inevitably carries greater risk. Just as when
a Premier League footballer decides to
become a professional boxer (hello, Rio
Ferdinand), a women’s magazine publisher
that decides to launch a range of yoghurt (as
Cosmopolitan did in the 1990s) is likely to
end up coming a cropper.
That’s why businesses sometimes justify
diversification in ways that sound a little,
well, desperate.
Take Blue Circle Cement, for example.
Back in the 1980s they stretched from
making products for the building industry
to manufacturing baths, ovens and finally
lawnmowers.
Asked how the latter fitted into their
area of expertise, one executive replied,
‘Well, we make things for houses - and
a lawn is next to a house.” Which is a bit
like somebody who runs donkey rides on
Redcar beach deciding to build fishing boats
as well.
Even when companies stick close to what
they know, it doesn’t always work out. US
beer giant Coors has made the clear Rocky
Mountains water they use to brew their
lager a cornerstone of their marketing. Then,
20 years back, some bright spark raised the
fateful question, “If the water’s so good,
why bother turning it into beer? Why not
just bottle it and sell it?”
So they gave it a go.
Sadly, it turns out people don’t want to
buy mineral water from a brewery.
The same happened with Coca-Cola
when they decided that they could use their
soft drink expertise to make wine as well.
And yet, weirdly, in the UK when I was a
kid nobody thought twice about buying their
ice cream from Wall’s - a company that also
made sausages.
Being a child of the Space Age, my
favourite example of diversification involves
lingerie firm Playtex, makers of the Cross
Your Heart bra. Back in the mid-‘60s they
shifted part of their production facilities over
to making space suits. And they did it so
successfully that theirs were the ones the
Apollo astronauts wore when they walked
on the moon.
If only the old Meridian knickers factory
in South Bank had cottoned on to that idea,
we might have had a Teessider on Mars by
now.