The Illusion of Diversification: Why Focus Beats Spreading Too Thin

Many organizations chase diversification not because it’s the right move, but because it looks like the right move. Instead of refining what they already do well, they stretch themselves across multiple ventures — often more for appearances than actual impact. In the process, they dilute their strengths, waste resources, and fail to achieve excellence in any area.

A common trap is prioritizing public perception over real progress. Some companies invest heavily in their social media presence, crafting an image of innovation and expansion, while their core business stagnates. Growth should be about substance, not just optics.

Warren Buffett has long challenged the idea that more investments always equal less risk. His philosophy is simple: focus on what you truly understand. Instead of diversifying just to hedge bets, he advocates for deep investment in a few high-quality businesses. Companies that master their niche don’t need to chase endless expansion — they win by being the best at what they do.

Companies That Got It Wrong

🚗 Ford’s Diversification Misstep
Ford tried to branch out into luxury brands by acquiring Jaguar, Land Rover, Aston Martin, and Volvo. Instead of strengthening its core business, it struggled to manage these brands and ultimately sold them off. Meanwhile, Toyota focused on its strengths — quality, reliability, and hybrid technology — and became a global leader.

📺 Quibi’s Short-Lived Experiment
Quibi, the short-form streaming service, raised $1.75 billion to create mobile-first entertainment. Instead of perfecting its content strategy, it spread money across flashy partnerships and marketing. It shut down within six months, proving that throwing money at diversification without understanding the market is a recipe for failure.

📱 Nokia’s Tech Overreach
Nokia dominated mobile phones but lost focus by expanding into too many tech sectors. Instead of doubling down on smartphones and software innovation, it got complacent. Meanwhile, Apple and Samsung stayed laser-focused on mobile and overtook Nokia completely.

Companies That Got It Right

🛒 Amazon’s Strategic Expansion
Amazon didn’t diversify randomly — it expanded methodically. It perfected e-commerce before launching AWS (cloud computing), a business that aligned with its tech infrastructure. Instead of jumping into unrelated industries, Amazon leveraged its existing strengths to grow.

🍔 McDonald’s Simplified for Success
McDonald’s once tried to diversify with menu experiments, from pizza to gourmet sandwiches. When this diluted their brand, they refocused on their core strengths: burgers, fries, and efficiency. The result? Higher profits and better customer satisfaction.

The key takeaway?

💡Knowledge reduces risk more than diversification does. Businesses that double down on their strengths, refine their expertise, and improve their core offerings will always have the edge over those that scatter their efforts for the sake of appearances.

What do you think — does your organization prioritize focus or fall into the diversification trap?

Francisco Cobos

🐢 “Poc a Poc” (Little by Little)