Framework library · Growth strategy

Ansoff matrix

There are four ways to grow: sell more of what you have to the customers you have, take it to customers you do not have yet, build something new for the customers you have, or do both at once. Each step away from what you know raises the risk and changes the evidence you need before committing money.

LevelFoundational
TimeAn hour to sort the options, and longer to find the evidence for each
Who to involveWhoever owns growth, with finance, and someone who talks to customers every week.
Also calledProduct-market growth matrix, Ansoff growth matrix, four growth strategies

Use it when

  • A growth plan exists as a list of ideas and needs to be sorted into bets with different risk.
  • The board is weighing a new market or a new product and wants to see what kind of move it is.
  • You want to check whether the plan leans too heavily on the riskiest kind of growth.

Avoid it when

  • You need to know which option is worth most. The matrix sorts by type of move, not by value. Score the options with a weighted matrix or a business case next.
  • "New" is undefined. Agree what counts as a new market or product (a new segment, a new region, a new channel) before sorting, or every option lands in the corner the sponsor prefers.
  • The question is cost or efficiency rather than growth.

How to run it

  1. List every growth option on the table

    Include the ones nobody likes. Write each as a move: "sell the business tier to existing SME customers", not "SME".

  2. Agree what "new" means

    For markets: a customer segment, region or channel you do not serve today. For products: something your current operations cannot deliver without new capability.

  3. Place each option

    Existing or new products, existing or new markets. If an option is half in, place it where most of the new work is.

  4. Size each one roughly

    Revenue potential is enough to start. The point is to see where the money is relative to the risk.

  5. Write what you would test first

    Penetration needs evidence of headroom; market development needs cost to serve; product development needs a priced offer in front of buyers; diversification needs a reason you would win.

  6. Check the balance

    A plan that rests mostly on diversification is a plan that rests mostly on hope. Most of the value is usually closer to the core than the room thinks.

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Mistakes to avoid

  • Calling a price cut "market penetration" and counting it as growth. It may only move revenue from margin to volume.
  • Treating an acquisition as diversification without asking what the business brings to it.
  • Placing options to make the plan look balanced rather than where they belong.

Where it comes from

H. Igor Ansoff, "Strategies for Diversification", Harvard Business Review 35(5), September to October 1957, which set out market penetration, market development, product development and diversification as the four product-market strategies. He developed it further in Corporate Strategy (1965). Source.

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