How does the Ansoff Matrix relate to your product strategy?

The Ansoff Matrix provides a clear, simple visualization of the four primary growth options available to a company: market penetration, product development, market development, and diversification. By plotting existing vs. new products against existing vs. new markets, the matrix allows to analyze and choose the risk and growth strategies that align best with their organizational goals.

I like the way the framework can be paired with other frameworks like the SWOT Analysis or Porter's Five Forces. For instance, using SWOT with the Ansoff Matrix can help companies exploit internal strengths to seize external opportunities. Similarly, combining the Ansoff Matrix with Porter's Five Forces can aid in comprehending industry competition and inform strategic choices about market penetration or diversification. These combinations show how the Ansoff Matrix can complement other strategic tools for well-rounded business decision-making.

When the external environment is complex and volatile leaders can retreat in terms of creativity - they may look to repeat old patterns of success, they may be in denial about how long a change will last and whether they can weather the storm, they may be desperate to push into new territories following an external trend that won’t necessarily fit. The Ansoff Matrix offers a structured approach to encourage greater creativity and critical thinking. It brings a divergence of options and approaches to the table which automatically gear the team for greater success.

Application of the Ansoff Mayrix isn’t restricted to the private sector. For example in healthcare, I have maximised market penetration by simply examining data for patients - ensuring they are attending regular checks, examining their notes to identify if they are at risk of developing a health condition or indeed suffering with an undiagnosed condition. Sometimes, a patient’s notes make reference to a condition that isn’t coded appropriately on the CRM meaning we aren’t able to draw down funding and the patient doesn’t receive the care they need. Making good use of an appointment to understand patient needs and recommend additional care, even that they are taking medication they should are also simple applications of Ansoff.

Ansoff's Matrix/Box is used in conjugation with few other analysis techniques during the Strategy Definition phase of a business/product. It is often revisited as and when new analysis is available and the business/product strategy needs revision. It is a great input to revise VMOST for the product/organization and updating the Boston Box for the product/business.

For example, a coffee shop chain might use the matrix to evaluate options such as expanding into new locations or even diversifying into related markets like coffee-based skincare. By assessing the risks and rewards of each strategy and aligning with organizational goals, the matrix helps to formulate an actionable growth plan.

Let’s build on this with an example of how the Ansoff Matrix is especially powerful in times of volatile change and complexity. Imagine your current market is distracted or slow to act due to constraints - for example in a hospital environment. By adopting the market development approach you actively take a fresh look at the value offering of your product and other (often adjacent) markets that could benefit. You could look at hospitals in other locations or different specialism. Expand to private hospitals, pharmacies, family doctors. Then, consider similar customers - social care, residential homes or prisons. Mapping in this way helps you to see that there are an abundance of pivots with minimal risk, effort or change to the core offer.

as an example, Using the Ansoff Matrix, a smartphone producer might employ 'Market Penetration' by boosting marketing to increase market share. If they create a smartwatch for existing customers, that's 'Product Development.' Exploring untapped overseas markets for their phones implies 'Market Development.' Venturing into a new market with a new product, like home appliances, is 'Diversification.' Each strategy, offering varying risk-reward balances, helps firms choose what best fits their goals and capabilities.

During the introduction and growth stages, the focus may be on market penetration and product or market development, capitalizing on new products and expanding into new markets. In the maturity stage, a combination of market penetration, product development, and market development can be used to maintain growth, while the decline stage may require diversification or aggressive market penetration.

Lots of accelerators like to focus on product market fit but not execution of the idea. That's where the Ansoff Matrix comes in and does both very reliably.

The Ansoff Matrix is a useful tool as businesses consider growth strategies since it contextualizes growth scenarios and simplifies the associated risk for various scenarios. Businesses looking for incremental growth can start to consider the go-to-market motion in terms that resonate with their specific products and market. For example, a company with a marquee product in a highly penetrated market needs to consider if their growth strategy is to introduce that product to new markets or sell new products to a market they have expertise in. The Ansoff Matrix can be a starting framework for that decision making process.

The Ansoff Matrix adapts to product life cycle stages. In the introduction and growth phases, a 'Product Development' strategy can refine the product for early adopters. As the product matures, a 'Market Penetration' strategy can expand market share. In the decline phase, a 'Market Development' strategy may find new markets. If the product is phased out, a 'Diversification' strategy can introduce new products, initiating a new product life cycle. Thus, the Ansoff Matrix offers stage-specific strategic guidance.

To choose your best growth strategy is a difficult decision, using both Ansoff Matrix and three horizons of growth together is very useful to clarify where you are and your potential growing path.