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Organizations approach corporate strategy in different and unique ways. Some will spend a significant amount of time doing one thing well (be it a task, promotion of service, or building of product). They’ll relentlessly push perfection, and in the process often drive high profit margins. Others promote diversification. Branching out/researching new business models can create new services, but in many cases it takes away key resources on an existing core competency. Thus, driving down profit margins, at least at the macro level.

In the market, financial analysts intinitiate coverage on organizations with complex business models. If more analysts cover XYZ stock it will usually carry a higher valuation than ABC stock. There are always exceptions to the rule, but choose an industry. Take two companies. Count the number of analysts. Compare the stock price. More coverage equals higher price. This almost always plays out.

And here lies the paradox. If an organization is measured by its stock price, most will choose diversification and lower profit margins. Something to ponder.