On Friday, Seth Godin had a post that nicely summed up the problem with diversification. A sample:
I drove past a hobby shop yesterday. It's hard to make out the awning, but it says, "Hobbies, Trains, R/C Models, Coffee, Lottery."Here's the thing: if you sell trains and coffee, no one's going to think of you first for either trains or coffee. The only time they'll think of you first is when they want trains and coffee at the same time.
Bit by bit, on each declining day, it became easier to become more average, to add one more item, to sell a few more lottery tickets or another cup of coffee.
And then, the next thing you know, there's some dusty trains in the back and you're running a convenience store.
The bottom line is that you can't be all things to all people. Instead, find your niche. Shrink to grow.