Product diversification is always going to be a part of a growing business. Sometimes, this diversification is vertical, which means that a company has moved into a different part of the supply chain. Other times, the diversification is horizontal. Horizontal diversification is when a business uses their existing business and infrastructure to develop new products or services to sell.
This strategy can also been seen in organizations. For example, KOMAZA, an social enterprise that seeks to reduce rural poverty by growing eucalyptus trees with rural Kenyan families, is considering horizontal diversification for their organization.
KOMAZA and the Challenge of Horizontal Diversification
According to the Wharton Leadership Blog, KOMAZA is working to create the infrastructure to support their organization. This means they must build the support for field workers and managers and high level support staff. These staff must also have the infrastructure to cultivate seeds, harvest trees, and sell the product. When KOMAZA refers to horizontal diversification for their business, they are talking about infrastructure to provide other services.
The main issues when it comes to KOMAZA’s horizontal diversification are timing, making feasible goals, and determining what additional services to provide. When is the best time to undertake this new venture, what should it look like, and will it work?
In order to better understand these challenges, attendees of the Wharton School Un-Conference Leadership were asked to tackle the problem. Attendees were split into small groups and ask to brainstorm challenges and solutions that KOMAZA may encounter before they are able to horizontally diversify. These attendees considered the strengths, weakness, opportunities, and threats of KOMAZA’s decision to diversification strategy.
The attendees determined that KOMAZA has the advantage of being a recognized and trusted brand, agricultural knowledge, and a proven track record of accomplishing tasks. They noted that the organization does have potential to build additional team capacity. However, there is a lack in the organization of financial literacy, proper healthcare, and it is located in an unpredictable climate. There is also the threat of physical and political instability, changes in the field, and the possibility of future competition. However, KOMAZA was still determined to have several opportunities. Right now there is no competition, plus collective purchasing power could create benefits. Maybe a seedling or greenhouse business could be a feasible option for horizontal diversification.
Attendees also analyzed the way that horizontal diversification would affect both KOMAZA field workers and the families and farmers that work with KOMAZA. By looking at the ways that this product diversification would improve the quality of life, affect the managerial capacity to handle such levels of expansion, and if credibility and skills would increase, the groups determined a series of expectations and questions that these groups might ask. For example, attendees thought that farmers and families that work with KOMAZA might like to know more about the business end of the organization, as well as understand more about horticulture. For field workers, the questions might be: Will there be adequate training for me as the organization grows? Am I skilled enough, or will I be asked to do too much? What is my potential for growth?
After assessing all these issues, attendees recommended exploring partnerships with non-profits and neighboring cities that may provide services and goods that KOMAZA cannot currently provide.