Growing your service business, or growing any type of business, is often a challenge for managers and owners. One well-known, but sometimes misunderstood, tool that can help you get a handle on how to grow is the Ansoff Matrix. The matrix, which has been around for decades [Cf., “Strategies for Diversification,” (1957) Harvard Business Review, Vol. 35, No. 5, pages 113-124] and is the newest addition on our Resources page, is a model that depicts four strategies that have proven to be the most common ways organizations grow. It consists of four quadrants along two dimensions. These dimensions are the key to understanding and using the matrix, as they help prescribe actions necessary to attempt implementing the growth initiatives. In fact, a commonly used name for the matrix is the Product-Market Growth Matrix.
One particular strategy is that of Market Development. Here, firms seek to grow by offering their services to new segments of customers or new geographic areas with similar customers. Succeeding with strategies in this quadrant depends on a firm’s capability to expand distribution beyond where it currently does. Two examples of such capability: a) how much capital the firm has available to invest in expanding its operations and b) marketing research expertise within the firm that can help identify the new segments’ needs.
Difficulties can arise in implementing market development initiatives. A recent survey of consumers regarding receptiveness to purchasing and owning an electric vehicle provides a good example. The survey found that the biggest reason for not buying EVs was the consumers’ doubt about being able to find charging stations wherever they might drive them. Thus, even a good product (or service) will find difficulty in growing if the appropriate investments have not been made. Clarifying where charging stations are located (as Tesla does on its website), making clear the plans for expanding their number, and doing other things to help potential customers climb the learning curve as new EV owners are just some of the necessary steps that would enable successful expansion into new markets.
Visit the Resources page on Simple Customer Service Rules dot com to learn more about market development and the other three Ansoff growth strategies. We include a section on how to apply the matrix in your own organization.
Contemplating growth can be intimidating. As Abraham Maslow put it, “One can choose to go back toward safety or forward toward growth. Growth must be chosen, again and again, fear must be overcome again and again.” Study your organization’s history of successful expansion and put the matrix to use in planning its future growth. You’ll be well-prepared to succeed.
- Terry