Be niche or go broad: A question of strategy

The default advice given to every emerging company is to focus on a niche — to select a specific, well-defined area and become really good at it to be able to win against bigger competitors.

I think this is good advice, in general.

Mastery

The idea behind building a niche is to concentrate resources on that area and gain mastery, hence bringing substantial value to customers.

Given the resource constraints (people and funds, essentially), it becomes easier for a small company to just pick one area and stay on it.

However, let’s say someone has done this well and reached a certain size, scale and profitability.

What then?

Should the company still stay very focused, even if its customers are asking for other services outside the niche?

Short-term businesses

The answer depends primarily on one aspect and one aspect only: If the business intends to raise venture capital or the founders want to exit the business in the short to mid-term, it is far better to stay and build within the niche, even if it means saying no to some other opportunities from existing customers. This makes the company a more attractive acquisition or investment target.

On the other hand, if the goal is to build a business for the long-term, it makes eminent sense to grab opportunities in areas outside the niche and be broad (within limits). I don’t advocate being everything to everybody.

Selective addition

But, it is fine to selectively add one or more additional niches that are allied in some way to the original niche.

Any more though, the company stops being a “niche player” since it can no longer easily define and explain itself by just one niche. It will be viewed as being broad, though the goal should still very much be to compete strongly and dominate a few allied niches.

So, how does a company operating within several niches define itself to potential customers and employees?

Maybe a topic for another day.

The dilemma for us set in when Aspire hit a $10 million mark and the company is 18 years old today.

With over 1,400 employees, Aspire has over 100 customers globally. The company is looking to reach $100 million in the next four years.

(The writer is CEO, Aspire Systems)