Sometimes, a business must first become smaller in order to grow. What I mean is that in order to focus on your strategic goals and respond to changes in demand and in the market, you may need to less of something. This includes stopping a specific product line, shedding customers, or even divesting of an entire business line. This way, you can adjust your strategy and refocus resources (both time and money) on your core competencies so that your business can grow long-term
Take Nestle, as an example. Over the past two years the company has divested of underperforming brands like Jenny Craig, Power Bar and Juicy Juice in order to concentrate on its core businesses.
Most recently, Nestle announced that it is in talks to form a joint venture with R&R ice cream. Nestle stated that it “would contribute its ice cream businesses in Europe, Egypt, the Philippines, Brazil and Argentina to the new joint venture. It would also transfer its European frozen food businesses, excluding pizza.”
By separating its ice cream business from its core businesses, Nestle can focus more on businesses that are aligned with its goal to be a recognized leader in Nutrition Health & Wellness. In addition, divestiture allows Nestle to rapidly adapt to a changing world and market. The mass ice cream market in particular is shifting as consumers demand healthier, fresh food or premium brands. Nestle also has struggled to compete with market leader Unilever. Forming a joint venture with R&R may allow Nestle to focus on more lucrative brands and increase the profitability of the company as a whole.
If, like Nestle, you can identify an area in your business that is not performing well, you may want to take a moment to pause and consider your options. Has customer demand changed? Are all your product lines profitable? You may want to rapidly respond to these changes. It may be as simple as discontinuing a product or service, dropping unprofitable customers, or even selling an entire piece of your business. While it may seem strange to get smaller in order to grow, these activities will help you align your business with your overall growth strategy and position your company for future growth.
Photo credit Christian Kadluba via Flickr cc