Every growth plan mixes four kinds of moves, which Igor Ansoff described in a simple matrix. Market penetration sells more of today's products to today's customers. Product development brings new products to existing customers. Market development takes existing products to new markets. Diversification does both at once.
The further a move is from what the company already knows, the less it can rely on its existing capabilities, data and relationships, and the lower the probability that it delivers what the plan promises.
Plot the plan, then weight it
The diversification bet promises the most revenue, 90 million, but with a 15% chance of success its expected value is 13.5 million, the lowest on the map. Expanding with key accounts promises a third as much and is worth 21 million, the most of any initiative. The plan that looks most ambitious on a slide is not the one most likely to deliver growth.
Building a balanced growth portfolio
- Fund the core first. Penetration moves are less exciting but carry high odds; they are the base of a credible plan.
- Step out one dimension at a time. A new product for existing customers, or an existing product in a new market, keeps one leg on known ground.
- Buy or partner for diversification. When both product and market are new, acquiring or partnering with someone who already knows them raises the odds.
- Report the plan probability-weighted. The board should see both the headline growth and the expected growth, and the gap between them.
Bartor S.
Founder
