101 Times Famous Brands Went Off-Theme And Made These Products

It's easy to understand why companies decide to diversify. 65% of CEOs of large companies around the world predict that in five to seven years, their firms' main competitors would be different from their main competitors today, and 63% say that new competitors with new business models would pose a major threat to their firms' core business.

The CEOs estimate that in the next decade, 40% of the value their companies created would come from entering new markets and launching new business models. Clearly, the business landscape feels highly unstable to them, which is no surprise given that new technologies continue to upend industries and wipe out businesses at a remarkable rate.

The good news to them is that now is a great time for companies to try to build new engines of profitable growth.

One study estimated that global investment capital had tripled in the past three decades and stood at 10 times the global GDP.

Additionally, high-growth industries today don't require as much investment as they once did; disruptive businesses can scale up faster in size and power with less capital.

However, experts point out that diversification is an unpredictable, high-stakes game. First of all, companies usually face the decision in an atmosphere not conducive to thoughtful deliberation.

For instance, an attractive company comes into play, and a competitor is interested in buying it. Or the board of directors strongly urge expanding into new markets. Suddenly, senior managers must gather mountains of data—including internal rate-of-return calculations, market forecasts, and competitive assessments—under huge time pressure.

Diversification as a corporate strategy goes in and out of vogue on a regular basis. Simply put, there is little conventional wisdom to guide managers as they consider a move that could greatly increase shareholder value or seriously damage it.

Before diversifying, businessmen must think not about what their company does but about what it does better than its competitors.

Consider the history of Blue Circle Industries, a British company that is one of the world's leading cement producers.

In the 1980s, Blue Circle decided to diversify on the basis of an unclear definition of its business. It was, the company’s managers thought, in the business of making products related to home building. So Blue Circle expanded into real estate, bricks, waste management, gas stoves, bath-tubs—even lawn mowers.

According to one retired executive, “Our move into lawn mowers was based on the logic that you need a lawn mower for your garden—which, after all, is next to your house.”

As you might've guessed, few of Blue Circle’s diversification forays proved successful.

Diversification will remain a tough task, and managers must study their cards carefully. It takes smart players to know when it’s best to place their bets and when it’s best to fold.

But, as we can see from the pictures, they're still gambling.