Lessons from TSMC: sometimes... you shouldn't diversify your business.

By Acquired

Categories: VC, Startup, Product

Summary

The best business is often the one you're already in. TSMC's CEO Morris Chang learned that trying to diversify from integrated circuits was not as profitable. Founders and builders should double down on their core strengths instead of chasing shiny new opportunities.

Key Takeaways

1. Focus on your core business - integrated circuits are the future and TSMC was already the best at them.
2. Resist the temptation to diversify - TSMC's attempts to exit the integrated circuit market or diversify were not as good as their core business.
3. Embrace your bias towards your strengths - TSMC took this to a 'fault' by hyper-focusing on integrated circuits.
4. Avoid the sunk cost fallacy - don't keep investing in underperforming business lines out of pride or stubbornness.
5. Build on your competitive advantages - TSMC was already the best at integrated circuits, so they should have doubled down on that instead of diversifying.
6. Prioritize profitability over growth - TSMC's laser-focus on their core business made them highly profitable, even if it meant forgoing other opportunities.

Topics

• Startup Strategy
• Competitive Advantage
• Diversification
• Operational Excellence
• Decision-Making

Transcript Excerpt

We were sitting down with Morris Chang and he was talking about TSMC. Yep. And he told us that one of the ways that they aired was trying to exit the integrated circuit market or diversify from that market. And none of those were as good of a business. And the the key insight was you're already in the best business. Integrated circuits are the future and will be for a long time. And you're already the best at them. So stop trying to do other things and just do that really well. Probably to a fau...