Dr. Russell F. Henke -- Business Consultant
Case #10 -- Diversify or Not? -- That Is The Question!
A ten year old company has grown slowly but profitably over time in an esoteric high technology field by offering software development services solely for a small number of US Government installations. The company’s record of on time - in budget - innovative software solutions has won universal praise among its prestigious but narrow clientele, allowing the company to bid and win additional government projects, albeit in the same niche. The projects are professionally challenging and exciting for the small staff of young technical wizards who populate this exclusive enterprise. Backlog has steadily increased and new people are very difficult to recruit and hire in today’s booming economy.
Moreover, the company's technically-oriented founders now find themselves doing far more business administration chores than they ever contemplated or enjoyed, owing to company growth. In addition, the repetitive nature of the projects has begun to dampen the founders’ original enthusiasm. Finally, they do not see clearly a future wherein the company can finally leverage its expertise toward a liquidity event, such as being acquired or going public. Indeed, the founders are unsure that they even desire the inevitable demands of ongoing growth, profitable performance, and administrative headaches. Still, they would ultimately like to ensure a significant return for the efforts of all the loyal employee-stockholders of the enterprise.
The founders decide they cannot solve the conundrum on their own. They decide to call in an experienced outside consultant.
After spending time with the founders, the consultant discovers that the company has grown almost of its own accord. There has never been a strategic business planning effort. Individual persistence and excellence on each project have carried the company and promise more of the same if the government funding sources do not dry up. Unfortunately these sources are already undergoing significant changes which have not yet caught up with the company’s quarterly performance.
The company also casually eyes other market niches which appear attractive…commercial projects…or even creating actual packaged software products which can be sold over and over. However, the people have little experience in creating, qualifying, marketing, selling or supporting a software product, nor has the company done many commercial consulting projects. Accordingly, the people are unsure that they want to exert the effort to explore these areas, since even if successful, it means more work and more people added, and the relative comfort of the status quo will be permanently altered.
The business planning process was underway at the time this case was written. See the comments of Mr. Richard H. Stottler III President & CEO, by clicking below of the "Client Comments" page, for the successful outcome of this consulting effort.
