As we look forward and collectively try to understand what the business environment might look like as we emerge from the global lockdown, consider the various scenarios and predictions one thing remains clear in my mind, agility and flexibility will be paramount to success.
You will all have heard the shocking predications that the global economy will fall into a depression similar to the 1930’s, remaining optimistic I see more of an economic compression, I am not predicting a ‘V’ shape bounce although I do believe that the fundamentals are very different and something I will discuss in a later blog. What is clear to me is that demand still remains, it may soften nevertheless it has not abated.
Conventional commercial wisdom has always suggested that the ‘BIG eat the small’, this I believe to be defunct. As we emerge size remains irrelevant, of critical importance is an organisations ability to deal with high velocity whilst remaining both agile and flexible. Adapting to speed will be critical to success, as we surface from this economic lockdown organisations will need to recognise the game has changed, action needs to be taken to act quickly and lead. Those looking for growth should not shy away from adopting new, emerging technologies as well as product diversification.
When considering new product strategies it is always prudent to first revisit your product SWOT analysis, I then promote the use of the Ansoff Matrix in exploring future growth opportunities.
The Ansoff Matrix is a strategic planning tool that provides a framework to help devise strategies. Each quadrant represents a different strategy and a different risk reward ratio.
There are four basic growth strategies to expand your business: market penetration, product development, market development and diversification.
Which strategy should the company pursue? To answer this you need to overlay the outputs of your product SWOT analysis, this will allow for better decision making from which you will be able to gain a better understanding of the risk/reward ratio.
Market Penetration: The first quadrant in the Ansoff matrix and the most common strategy deployed. With a knowledge of a known market its needs and the competitive landscape companies most commonly look to increase market share through commercial levers such as price. The challenge remains profitability and a potential race to the bottom as competition become more intense. The good example of such a scenario is the broadband industry.
Market Development: Market development is the second market growth strategy in the Ansoff matrix. This strategy can be an effective way to grow in the short to medium term, new markets are targeted using the existing product and infrastructure. Note also that new markets can be geographic or new market sectors. There are several examples with Apple leading the way.
Product Development: Product development refers to a scenario where a company may have a good market share in its existing sector and begins to see the risk of diminishing rates of returns, expansion needs to come form new products and services. A market penetration strategy is no longer viable and a new product development strategy is a better proposition.
Diversification: The diversification strategy in the Ansoff matrix applies when the product is completely new and is being introduced into a new market.
Although the highest risk approach, as both market and product development is required, the risk can be mitigated through related diversification. There could be potential synergies between the existing business and the new product/market.
The decision on which strategy to pursue will depend on a number of factors, what is clear is we will emerge into a different landscape, ‘business growth beyond survival is critical’, doing what you always did will not deliver what you always had, be ready to embrace change.
Time will remain a precious commodity as many of the commercial activities that have ceased begin again and business as normal monopolies the working day. Consider the expansion of your resource to include subject matter experts to help navigate through development and diversification in an agile and flexible manner.
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