I was reading an interesting article this morning, a growth study, about Starbucks and how they differentiate themselves in the market.
If you don’t know much about the Starbucks story I suggest picking up Howard Schultz’s Starbucks biography called Pour Your Heart Into It. It’s a quick read and fills in the “how we got here” more accurately than any short article.
In this article, they pointed out the Ansoff Matrix.
This is named for Russian-American mathematician/business Igor Ansoff (I guess this makes him one of the original gangsta growth hackers?).
He suggested that there are just 4 ways to grow a business.
- Market penetration
- Market development
- Product development
- Diversification
Market Penetration
This is the classic way most people approach business.
They setup their shop, buy products and sell it to an existing market.
It’s an old product being sold to an existing market and the aim of the game is to capture market share from the competitors.
Market Development
This is where you bring an existing product to a new market (maybe with some modifications).
Starbucks fits squarely in this example, Schultz brought the Italian coffee experience to America. Prior to this, people generally were happy drinking poor quality drip coffee or instant coffee at home.
He taught the nation to appreciate the coffee experience in a similar (but Americanized) way to the Italian’s coffee culture.
Product Development
Product development is where you innovate on the product but sell it to the existing market.
You make a new version of the product that is distinctly superior to the old version.
Diversification
Last is diversification, this is the game many “startups” play where they are bringing a completely new product and trying to conjure up a completely new audience at the same time.
This is high risk but can have enormous rewards.
Why These 4 Ways To Growth Are Important To Remember
The strategies needed for each are very different.
For example, market penetration can be achieved by lowing your prices in comparison to others.
Whereas product development might be achieved by investing in the creation of new products for an existing market segment that the company already plays in.
Do you know where your company sits in these 4 ways to growth?
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