Ansoff Matrix
The Ansoff Matrix is a strategic planning tool that helps organisations evaluate growth strategies. It categorises products and services based on two dimensions: offerings and markets.
Each strategy will sit in one of the four quadrants:
Market Penetration: These are opportunities to increase sales of existing offerings in current markets. Market penetration is generally seen as low risk.
Market Development: These are opportunities to sell existing offerings to a new market. Market development is generally seen as medium risk.
Product Development: These are opportunities to create a new offering and sell to existing customers. Product development is generally seen as medium risk.
Diversification: These are opportunities to create a new offering and sell these to a new market. Diversification is generally seen as high risk. Diversification opportunities can be further categorised into:
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- Related Diversification: These are opportunities to deliver new products or services that are somehow related to existing offerings.
- Unrelated Diversification: These are opportunities to deliver completely new and unrelated offerings to new markets. Unrelated diversification is generally riskier.
The results
- An understanding of growth opportunities
- An understanding of potential risks associated with each opportunity
When to use it
Strategy Formulation: When defining the strategy for an organisation
Product Development: When exploring opportunities to develop new offerings
Strengths
Simplifies complexity
Versatile across industries
Helps identify growth opportunities
Useful for evaluating risks
Weaknesses
May oversimplify the complex
Doesn’t account for competition or industry-specific challenges
Focuses on growth more than on operational efficiency
Doesn’t help implement strategies
How to use it?
What do I need to start?
- Clarity on business goals
- Insights on current and potential customer segments and markets
- A list of existing offerings across the organisation and insights into how they are performing
- A list of potential new offerings
How to use it?
Who to involve?
- People who can provide strategic direction and make decisions about resource allocation
- Representatives that have knowledge of markets including opportunities and threats
- Representatives that can assess feasibility of offerings including effort and financial implications
Step by step
1
Reflect on the organisational objectives
Identify all current offerings and the markets they serve.
Clarify the definition of ‘existing offerings,’ for example: specific categories or niches.
Clarify the definition of ‘existing markets,’ for example: current geographic or demographic segments.
Challenge the assumptions made when defining existing offerings and markets. Defining the existing offerings and markets correctly is important to ensure the risks are accurately assessed.
2
Define existing offerings and markets
Identify all current offerings and the markets they serve.
Clarify the definition of ‘existing offerings,’ for example: specific categories or niches.
Clarify the definition of ‘existing markets,’ for example: current geographic or demographic segments.
Challenge the assumptions made when defining existing offerings and markets. Defining the existing offerings and markets correctly is important to ensure the risks are accurately assessed.
3
Assess current state
Assess how well current offerings are performing in terms of sales, customer satisfaction, and market share.
Identify trends, opportunities, and challenges in the market. Consider using PESTEL to support this.
4
Brainstorm growth strategies
Determine where innovation or new offerings could support growth. Ask questions like:
Market Penetration
- How can we improve our current offerings to differentiate from competitors?
- Are there trends or technologies we can capitalise on to enhance our existing offerings?
Market Development
- Which new geographic markets can we expand into?
- Are there demographic segments that haven’t been targeted yet?
Product Development
- What new offerings can we introduce to meet existing customer needs?
- What problems do our customers have that we can solve?
Diversification
- What new products or services can we develop for completely new markets?
- What strengths do we have that can be used to meet a new market’s needs?
5
Select growth strategies
Consider and evaluate each strategy.
There are several approaches that can be taken to prioritise, consider using the Impact/ Effort Matrix or Cost-benefit analysis.
Consider asking questions like:
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- Does this strategy align with the organisations vision?
- How well does this strategy leverage the organisations core strengths?
- What is the size and growth potential of the target market?
- Are there clear opportunities to capture market share?
- How competitive is the market, and what are the barriers to entry?
- Can the growth strategy be achieved using the organisations available resources?
- What are the risks associated with this strategy, and how can they be mitigated?
- What is the expected return on investment and expected timeline to profitability?
6
Create an action plan
Develop a detailed action plan for implementing chosen strategies. Consider populating a Product roadmap.
Allocate resources, set timelines, and define key performance indicators (KPIs) to measure success. Consider developing a Project Initiation Document (PID) for each initiative required to implement the chosen strategy.