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Diversification into adjacencies
What it is
Extending beyond a core business into a related one that uses the same capability, asset or customer relationship. A component maker moves from automotive into railways and defence; an airport earns from retail alongside aeronautical charges; a cinema earns from food; a pipe maker adds fittings and tanks
It is the standard response to a core market that is cyclical, structurally threatened or capped in size
Impact on industries
- Reduces dependence on a single end-market cycle, and is often the only defence against a structural threat such as electrification to the core
- Reuses existing plant, engineering or distribution, so incremental capital is modest relative to the revenue diversification achieved
- Qualification and approval cycles in new segments are long, so diversification takes years to become material
- The adjacency puts the entrant against established specialists where it has no incumbency, and management attention is finite