Ansoff’s Matrix was first published in the Harvard Business Review in 1957. Since its publication, it has given generations of marketers and business strategists a quick and simple way of thinking about growth.
In essence, this is the grid.
It shows four ways that businesses can grow, and helps those planning the strategies to think about the risks associated with each option.
In his matrix, Ansoff shows the risk that a particular strategy will expose you to, the idea being that each time you move into a new quadrant (horizontally or vertically) you increase risk.
The low risk option is to stay with your existing product or service in your existing market (market penetration). You know the product works, and you know and understand the market.
You increase your risk by either moving into a new marketing with an existing product (market development) or developing a new product for an existing market (product development). You obviously need to conduct thorough marketing research before taking any decision relating to business growth strategies. The new market may turn out to have radically different needs and dynamics than you thought, and the new product may just not be commercially successful.
Diversification is where you are really entering the unknown! New products into new markets where you are totally exposed and competing with established suppliers in the market.
Ansoff is a powerful tool and I’ve just scratched the tip of the iceberg here so if you would like help to apply Ansoff’s Matrix to your own business, please let me know.