S7 E29 The Ansoff Matrix – How it can help your startup scale with Jeremy Gray

‘Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!’

The Red Queen – Alice in Wonderland – Lewis Carroll Published 1865 Every entrepreneur starting out has visions of her/his baby growing into a successful business. They may not be dreaming of becoming a unicorn, maybe $1 Million turnover is their goal. But at some point, in the business lifecycle they will need to reinvigorate their business. Like any project business expansion is a balance of risk versus reward. Let’s examine a couple of tools that may help you decide how to expand your business.

The Ansoff Matrix was developed by Igor Ansoff and published in the HBR in 1957 under the title Strategies for Diversification. Ansoff argues there are only four strategies for growth: Market penetration – Increasing sales of existing products into an existing market Product Development – Introducing new products to an existing market Market Development – focuses on entering a new market using existing products Diversification – Entering a new market with the introduction of new products. Ansoff also evaluated the risk associated with the four strategies and plotted this on a 2X2 Matrix. The lowest risk was assigned to Market Penetration The highest risk was assessed to be Diversification. How can a matrix developed nearly 65 years ago be relevant to entrepreneurs today? If you are pitching to investors, you can almost 100% someone is going to ask you “How are you going to scale?” It’s true that Ansoff research was focused on later stage businesses, but he did focus on growth. And growth is what startups are all about, so Ansoff remains relevant. The relationship between markets and products provides a framework for how your company can grow. Markets are not necessarily based on your customers characteristics, such as geography but more based on their objectives. People do not buy drill bits, people buy holes – the concept of jobs to be done. – Clayton Christensen Use the matrix and “jobs to be done” concept to map out your scale up. The lowest risk path to growth is market penetration. Selling more of your products into the existing market. If you have a multi-generational product strategy that will keep you ahead of your competition and allow increased market shar this may be all you need, for now. But without innovation your company will eventually stagnate. Existing customers are the easiest to sell to. Identify “jobs” that need to be done that are not done well or not being done at all. What work arounds have your customers invented? What tasks do people want to avoid? What surprising uses have customers invented for existing products. This can lead to entering new markets. Diversification is probably not applicable at this stage of your company’s development. It has the highest risk Backers will question your business concept. Why are you launching with one idea and planning to move into another business concept? The Ansoff matrix is easy to understand. Plot your expansion plans on the matrix to help investors grasp your scale up concept. I recommend the article Know Your Customers’ Jobs to be Done published by HBR. Link below:

https://hbr.org/2016/09/know-your-customers-jobs-to-be-done

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