There comes a time for any company when expansion becomes your number one priority. The question then becomes, whether to diversify or focus fully on your own lane.

Author Nick Saraev

Photo: Freepik

The answer you get will depend on who you talk to, with just as many experts saying to keep things simple as go all in with the change. However, for many B2B manufacturers, the question shouldn’t be whether to diversify, but how you can plan your diversification strategy in a way that ensures success. 

Stephano Image, the Director of After Sales and Spare Parts at Carraro, shared how his team was able to exponentially expand their spare parts department through specific diversification. By following their example, and learning from their challenges, you can bring your business into a new age of growth. 

Growing Your Parts Department Organically 

Before we zoom in on Carraro’s diversification strategy, let’s look at the foundation they started with. The company’s main product line is power transmissions. They create these parts for a variety of OEMs in the agriculture and construction fields. 

The first step in their expansion journey was finding more channels for their spare parts sales. When you sell components for larger machinery, like transmission parts that might be in a tractor or car, selling to the end user in the spare parts industry is a must. 

The chances of the vehicle staying with its original owner for its entire lifecycle are slim to none, which means there’s a necessity for spare parts to come from the manufacturer, not just the dealership. The goal is not to be in competition with the OEMs, but to work alongside them to ensure their machinery was operational for as long as possible. 

However, once they were selling spare parts to the OEMs, the dealerships, and the end users, it seemed there was no where else to grow. That’s when the idea for Beyond Carraro came into play. 

The Road to Diversivication

Beyond Carraro is a program set in place to offer Carraro’s network access to products from their suppliers. Every single component that goes into their builds, from the smallest gear to the largest tractor, is available. This means that they’re able to tap into the expansive market without having to manufacture more parts themselves. 

An example of this program at work is with construction equipment. If something goes wrong with your backhoe, you would reach out to Carraro for the parts to fix your transmission. Because you’re already in contact with the company, it makes sense to get any other pieces you need from the same place. You can get cabin glass, breaking parts, and anything else you need all at once because Carraro is sharing their supply line with you. 

Let’s take a look at how they were able to implement this innovative strategy. 

Step One: Find out What the Network Wants

Carraro operates internationally, and each segment of their network has different needs and processes. 

If you’re able to have good turnover for a client, but only represent about 10% of their business, there’s lots of space for you to grow. How much of that additional 90% are you able to move in on simply by offering a wider range of products that you already have access to? 

Step Two: Connect Your Networks 

The pitch was relatively simple. Carraro wanted to open up the doors and become a one-stop-shop for their clients. 

  • Diversification –  Offer spare parts that were outside their core business model
  • Quality Across Sectors –  Bring in the best components for agriculture, construction equipment, material handling, and automotive
  • Simple Distribution –  Consolidate the supply chain and distribution network for each strategic geographic area 
  • Collaboration – Partner and work with reputable manufacturers within their field

Through this program, Carraro was able to offer their clients a variety of vehicle parts and accessories, powertrain parts, lubrication, and more. The key is to only offer what different sectors need so as not to overwhelm the customer. 

Step Three: Brand Consistency 

Rather than simply passing along unaltered products, Carraro took care to brand every single piece bought through this program. They also added a QR code to communicate the application of the parts to anyone who used them. 

If branding isn’t possible, they will promote the names of their partners to keep the relationship strong. The most important factor is instilling trust in your band. When your clients need something, they know they can come to you. 

The Benefits of Diversification 

Since implementing this strategy, Carraro has enjoyed the many benefits of diversification, including

  • Increased Revenue – Offering more solutions to more problems means more sales for your business
  • Customer Satisfaction – When your clients know they can get everything they need through you and your network, their loyalty and satisfaction flourish
  • Expanding Your Network – As you expand your offerings, you’ll expand your user base and build relationships with new partners 
  • Innovation – Bringing in partners and exploring other products that might benefit your customers allows you the freedom to innovate in tech and other fields that may not fit in the purview of your core business model 

With so much to gain, this is an excellent strategy for companies hoping to grow their market share. 

Challenges of Diversification 

When asked, Image said the biggest challenge they faced was partnering up with other companies. Asking other manufacturers to work with you opens up the door for mistrust and confusion.

This is especially true when you’re looking to work with a company that has traditionally been your competition. However, when you work together you are able to bring solutions to the market far quicker, boost customer satisfaction, and expand your profit. 

One of the largest hurdles to overcome when partnering with other companies is the idea that sharing your knowledge is a loss. However, this isn’t true. Historically, businesses like Tesla who have shared their knowledge with the industry have grown far faster than those who keep everything under lock and key. 

In Conclusion

Diversification isn’t for everyone. It’s a lot of work and takes time to grow into a new niche. However, if you leverage technology and connections with your supply chain, you can have the power of a diverse portfolio without re-inventing the wheel. 

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