, in order to exploit its capabilities in mobile, without having to create banking products itself, because it operates with a constellation of partners. Of course, the option to work with other firms was available in the past as well, but coordination with other organizations has become easier, and with it more wide-spread, owing to digital technology, which has led to an increase in communication technology and technology standards, among others.
While digitization has decreased the costs of diversification, concurrently, it seems to have increased the benefits of diversification, particularly through the heightened importance of data as a strategic resource. Traditionally, underutilized resources become more difficult to exploit the further a company moves away from its core business.
And then there’s data, which can often be leveraged in businesses very different from where it originated. For example, Alibaba has successfully, using behavioral data generated through its e-commerce platform. Apple can harvest behavioral data from its Apple watch wearers, which it can analyze and utilize to develop insights about their nutrition, shopping, entertainment, or health.
The bottom line is this: with its costs decreasing and its benefits increasing thanks to digital technologies, the optimal level of diversification is rising. Hence, the de-diversification of firms over the past decade is taking place in a context where more diversification is warranted.The focusing of many companies over the past decade, often done under pressure from boards, analysts and consultants, has gone too far.