Short Answer:

Only when you’ve provided the 100% solution for the markets and product lines you’re already serving – and you’ve maxed out those markets. Otherwise, you leave the door open for more focused competitors to erode your base.  “Protect your base” is key.  Read Crossing the Chasm by Geoffrey Moore to understand how to move to “adjacencies” in product lines and markets when ready.

Longer Answer:

Think of Google before expanding into new markets and product lines.  After dominating search, they expanded into Nest thermostats, etc. – creating the need for a new brand Alphabet. Yet years later they realized that $2 trillion of their market cap came from search and the next trillion as well.  In the meantime, the distraction of all the other things they were doing let OpenAI sneak up on them and threaten their search dominance.

It’s the same thing Steve Jobs realized when he returned to Apple.  He pulled them out of everything – handhelds, scanners, printers, etc. – and focused Apple on making a great computer and laptop – one for each the consumer and business markets.  The rest is history, releasing one new product every few years like Pixar releases animated films.

And I think of Kind bars – the nutritional bar manufacturer.  When the firm was purchased for $5 billion, they asked the founder the main thing he did to drive that kind of valuation and he said “to keep us focused on just making bars.” So many consultants suggested they leverage their brand into other food and snack products which he successfully resisted.    

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