5 Lessons on Innovation: Diversification (Episode #2)

Dear Innovators,

This week I’d like to kick off episode #2 of "5 Lessons on Innovation" by starting to decode a very strong, but terribly difficult strategy to execute: Diversification!

Last week, we found out that business model transformation as a strategy is usually not successful (in case you’ve missed it, view it here ).

Diversification, on the other hand, is indeed a strategy that is proven to actually work - especially in times of disruption (aka NOW).

Without further ado, enjoy watching the second episode of "5 Lessons on innovation" Diversification: Diversify into new revenue streams

A few more insights into this episode and why it is so important: At Stryber, we test hypothesis on a daily basis, so we looked closely at how innovative companies performed on the stock markets between 2010 and 2019 (i.e. a period without external shocks, just after the financial crisis and before Covid-19).

The most shocking number we found is that more than 68% of the companies that we examined over the 10-year period, did not show any signs of diversification AT ALL. The other main finding: Companies that diversified strongly increased their shareholder value by more than 50% on a year-by-year basis compared to those which didn't diversify into new revenue streams. (Have a look at the complete diversification study , if you’re curious.)

Achieving new growth through diversification sounds easy: ”Let’s do something new! How hard can it be?” Unfortunately, it is indeed terribly hard. We know that the majority of ventures don’t make it to scale, 89% to be precise, for a variety of reasons that we are happy to elaborate in future episodes (see our study on startup failure rates in Europe ).

That fact leads to the recognition that only constant diversification efforts into multiple new revenue streams can have a chance of success in the long run. That's why it's so important to get your diversification efforts right from the beginning.

I’m always curious to discuss diversification strategies in different contexts - feel free to reach out and let’s have a chat.

Thanks for tuning in,

Jan Sedlacek, Co-Founder of Stryber

P.S. Next up is episode #3 “Not all roads lead to Rome: Invest only in strategies that actually work”