The Growth Strategy Matrix: Are You Strategising to be Dominant, Disruptive, Differentiated or Out of Business

In the world of business, the ability to grow and expand is critical for success. But with so many different strategies and approaches, it can be difficult to determine the right path forward. That's where the growth strategy matrix comes in - a tool that helps businesses understand their market position and identify the best way to achieve growth. In this article, we'll take a closer look at the four quadrants of the growth strategy matrix, exploring the benefits and challenges of each.

Differentiated strategy — Win all types of customers (gets job done better, charge more)

The first quadrant of the growth strategy matrix is the differentiated strategy. This is where a business seeks to win all types of customers by being the best at what they do. They charge higher prices, but customers are willing to pay because they believe they are getting the best possible product or service. Differentiated strategies are often associated with large, established companies that have a strong reputation and extensive resources.

One example of a company that uses a differentiated strategy is Apple. Apple is known for creating high-quality, innovative products that are designed to meet the needs of a wide range of customers. They charge a premium price for their products, but customers are willing to pay because they believe they are getting the best possible experience.

The benefits of a differentiated strategy are clear. By being the best in the market, a business can attract a wide range of customers and charge premium prices. This can lead to increased profits and long-term success. However, there are also challenges associated with a differentiated strategy. For one, it can be difficult to maintain a differentiated position over time, especially as competitors enter the market. Additionally, differentiated strategies require significant resources and investment, which can be a barrier for smaller businesses.

Disruptive strategy — Win overserved customers (gets job done worse, charge less)

The second quadrant of the growth strategy matrix is the disruptive strategy. This is where a business seeks to win overserved customers by offering a product or service that is less expensive but may not be as good as what is currently available in the market. Disruptive strategies are often associated with startups and new entrants into the market.

One example of a company that uses a disruptive strategy is Uber. Uber disrupted the traditional taxi industry by offering a cheaper, more convenient alternative to traditional taxi services. While some customers may still prefer traditional taxis, many are willing to sacrifice some quality for the lower price point and convenience of Uber.

The benefits of a disruptive strategy are clear. By offering a cheaper alternative, a business can attract a new set of customers who may not have been able to afford the product or service before. This can lead to increased market share and growth. However, there are also challenges associated with a disruptive strategy. For one, it can be difficult to maintain a disruptive position over time, especially as competitors enter the market. Additionally, disruptive strategies can be risky, as they often require significant investment without any guarantee of success.

Dominant strategy — Win underserved customers (gets job done better, charge less)

The third quadrant of the growth strategy matrix is the dominant strategy. This is where a business seeks to win underserved customers by offering a product or service that is better than what is currently available in the market but at a lower price point. Dominant strategies are often associated with companies that have identified a gap in the market and are seeking to fill it.

One example of a company that uses a dominant strategy is Dollar Shave Club. Dollar Shave Club identified a gap in the market for affordable, high-quality shaving products and created a subscription-based service that provides just that. By offering a better product at a lower price point, they were able to win over underserved customers who were frustrated with the high prices of traditional shaving products.

The benefits of a dominant strategy are clear. By offering a better product at a lower price point, a business can win over a new set of customers who were previously underserved by the market. This can lead to increased market share and growth. However, there are also challenges associated with a dominant strategy. For one, it can be difficult to maintain a dominant position over time, especially as competitors enter the market. Additionally, dominant strategies require significant investment in research and development to create a better product, which can be a barrier for smaller businesses.

Out of business — In due time (gets job done worse / charge more)

The fourth and final quadrant of the growth strategy matrix is the out of business quadrant. This is where a business gets the job done worse or charges more and, as a result, loses customers and eventually goes out of business. This quadrant represents the worst-case scenario for any business, and it's important to avoid it at all costs.

One example of a company that failed to avoid this quadrant is Blockbuster. Blockbuster was a dominant player in the video rental industry, but they failed to adapt to the changing market and the rise of online streaming services. As a result, they lost customers to companies like Netflix and eventually went out of business.

The benefits of avoiding the out of business quadrant are obvious. By providing a product or service that meets customer needs at a reasonable price, a business can ensure long-term success and growth. However, this is easier said than done, and it requires businesses to constantly adapt and evolve in response to changing market conditions.

Choosing the right strategy

So, how do businesses choose the right strategy for their needs? The answer depends on a variety of factors, including market conditions, customer needs, and available resources. However, in general, the following are some guidelines for when companies can attempt the different strategies:

Disruptive strategy: This strategy is typically suited for new and emerging companies that are entering a market with low barriers to entry. Startups and small businesses may benefit from this strategy as it enables them to gain a foothold in the market and compete with established players. A disruptive strategy can be effective in a market where customers are underserved, and the existing players have failed to innovate.

Dominant strategy: A dominant strategy is best suited for established companies that have a clear understanding of their customers' needs and have the resources to invest in research and development. These companies are often market leaders and can leverage their brand reputation and customer base to differentiate themselves from their competitors. This strategy is suitable for companies that have identified a gap in the market that they can fill with a better product or service.

Differentiated strategy: A differentiated strategy is best suited for large and established companies that have already achieved a significant market share. These companies have the resources and the economies of scale to offer a superior product or service at a higher price point. The differentiated strategy is effective when the company has a strong brand reputation and can command a premium for its product or service.

Out of business: No company should intentionally aim for this quadrant of the growth strategy matrix. The out of business quadrant is a result of a company's failure to adapt and evolve with the changing market conditions. Companies that fail to keep up with the evolving customer needs and technological advancements can find themselves in this quadrant.

In summary, the timing for companies to attempt different strategies varies depending on the company's size, market position, and resources. Startups and small businesses may benefit from a disruptive strategy, while established companies with a strong market position may prefer a differentiated or dominant strategy.

Regardless of the chosen strategy, it's important for businesses to be agile and adaptable. Market conditions can change rapidly, and businesses that fail to adapt will be left behind. It's also important to understand that no strategy is foolproof - even dominant companies like Apple can face challenges if they fail to innovate and evolve.

Conclusion

The growth strategy matrix is a valuable tool for businesses looking to understand their market position and identify the best path forward. By considering the four quadrants - dominant, disruptive, differentiated, and out of business - businesses can make informed decisions about their growth strategy. While there are benefits and challenges associated with each quadrant, the key is to choose a strategy that aligns with customer needs and available resources while remaining agile and adaptable in the face of changing market conditions. With the right strategy in place, businesses can achieve long-term success and growth.