Crisis Reveals Value and Feasibility of Diversification
In early November, Jet Blue announced a foray into the saturated but thriving short-term vacation rental industry. Amidst ballooning IPO valuations (see AirBnB), expansion by other behemoths into the marketplace (see Marriot), and the burgeoning (albeit not quite universal), COVID-inspired mantra of “more time away, less places visited,” heralding Jet Blue’s arrival to the party is not unwarranted. But an examination of the events that precipitated their pronouncement reveals an important lesson about disaster mitigation.
It Pays to Diversify
No business can predict the future. But we can safely deduce from COVID that reliance on a singular revenue stream means dangerous exposure in times of drastic shifts of consumer behavior. Consider, for example, the restaurant that pre-COVID-19 scaled all of their take-out infrastructure, prepared-food offerings, shelf product manufacturing (seasonings, sauces, etc.), long-range delivery availability and other revenue streams. No guarantees, of course, but when consumer behavior shifted, they weren’t left quite as scrambling to react. Consider, further, the niche property management company which ancillary to offering rentals, developed product placement practices, construction management consulting and concierge services. To a meaningful degree, for them loss in rental revenues can be compensated for with profits from ancillary offerings. Even dunkin donuts sells candles.
How to Diversify
Brand recognition transcends product and service categories. Consumer education as to quality with a particular set of goods is contagious to others. Identifying ancillary offering categories is sometimes as simple as looking one shelf down in the food store, one column over on amazon, or one-page past in a magazine. A brand that identifies its marketing channels has by default identified where else it is fit to market. This is not an exercise in intuitiveness, but rather a clash with common sense. In other words, if your restaurant sells hamburgers, ask yourself… can we make a better ketchup?
The next step is “doing it,” so to speak. In the art of building a business, everything sounds easier than it is. But the best market research is actually researching the market. This is particularly true of service providers with built-in customer bases and minimal barriers to entry into ancillary areas.
Legal Diversification Planning
For an attorney, it pays to ask a client about their five-year plan. An alarming percentage of even the most prescient entrepreneurs have neither contemplated the pivot, nor committed to exploiting the spoils of diversification. A simple google search and cursory USPTO trademark register review can yield invaluable insight into where organic expansion is unrestrained. And business owners should capitalize on those opportunities. There is no requirement that a restaurant launch a sauce concept before the next pandemic hits, but do not they at least owe it to themselves to secure the preliminary rights and weed out any obstructions? Trademark law is forgiving to owners who have for too long sat on their laurels, and flexible to those unafraid of planning. By securing rights in ancillary product and service lines, not only does a company broaden its asset portfolio (and IP is nearly everything), but cuts through the red tape that at a more adverse juncture could be the difference between evolution and liquidation.
And so, bravo to JetBlue for recognizing the gold mine next-door dressed in invisible clothing – better late than never. But consider for the moment all of the refunds awarded for travelers weary of being airborne for the risk of what’s airborne. Back in April I advised a client, masters in on-the-ground vacation planning, that a call to JetBlue in their time of strife could yield not only a superlative strategic partner, but a source of revenue that was otherwise being, plainly and simply, disregarded. Nothing came of that call (although in the client’s defense there were already more than a few irons in the fire in the vein of this writing). But had JetBlue had similar foresight, their diverse business could have reoriented during COVID, and been poised for explosive vertical integration once the skies were once again friendly.