#42 15 strategic options for growing your business

This blog post covers a topic that matters to anyone who works with strategy, directly or indirectly: strategic options.

We often have too many choices and no idea which way to go. But we need a clear direction in mind to make good strategic decisions for our company.

So today I want to give you a brief look at the topic of "strategic challenges," which, by the way, we cover both in our book and in our StrategyFrame®.

It's important to look at these two concepts together, because the strategic challenges are closely tied to the strategic options and derive from them. Those, in turn, are based on the situation analysis, where you analyze and define the current state so you know exactly where a company stands and which realities you have to account for.

In short, strategic options are the different paths available to an organization or company for reaching its goals and vision, or for growing the business.

As so often, there's a tool for this. An absolute classic is Ansoff's product-market matrix (also called the Ansoff matrix, after its creator; 1957), which we'll look at more closely below.

The product-market matrix helps you develop a growth-oriented corporate strategy.

On one axis, the market is split into

existing markets and new markets.

On the other axis, the products are split into

existing products and new products.

Each product-market combination points to a corresponding growth strategy for the company, which we'll explain in more detail in a moment.

The Ansoff matrix distinguishes four strategic options: market penetration, market development, product development and diversification.

Building on this model, Kotler and Armstrong added an extension in 2012 that expanded the original four fields of the product-market matrix to six.

In our view, though, some strategic options were still missing, so we took the liberty of expanding it once more.

The result: 15 possible strategic options available to you when it comes to shaping your company's continued growth.

And that's exactly what I want to walk you through now.

The process covers these topics:

growth or consolidation organic or inorganic growth, for example through acquisitions, geographic concentration or expansion, opening up new or existing markets or customer segments, offering new products or services in familiar markets, and identifying future markets and customer segments.

All of this breaks down into three main types of strategy:

consolidation strategies growth strategies future and disruptive strategies

The consolidation strategies are three additions that haven't appeared in the matrix in this form before:

That is, reducing the offering while simultaneously withdrawing from markets.

This means an offering or product stays in place, but markets are reduced: you exit specific markets with an existing offering when it's no longer worth it. It's essentially the counterpart to "market development."

This can happen by selling regional business units, for example, or by giving up an entire market presence. This kind of market consolidation was also visible in connection with the war between Ukraine and Russia, since the Russian market had to be partly wound down for sanctions reasons. Not in every country, not for every company, but it was a very significant factor.

The third field is steady product consolidation: reducing the product program or offering while staying in existing markets. In other words, loss-makers or resource drains are cut from the portfolio while the company remains in the markets it already serves.

Don't forget these three strategic options, because our favorite quote in Hope Is Not a Strategy is: "The essence of strategy is choosing what not to do." In other words, knowing and deciding what you shouldn't do (Michael Porter).

The reality is that companies are often in markets that don't pay off at all and, in some cases, don't even cover the cost of the salesperson, or they carry products in the portfolio that are more likely loss-makers or that won't make strategic sense in the future.

The second core block of strategic options is what we call growth strategies.

This area is wide-ranging and offers plenty of options.

The first classic option, also part of the matrix, is market penetration. This is a product-market strategy where companies use various measures to push up market share and tap the full potential of the existing market (with an existing product).

And how do you do that? Depending on what fits, what's needed and the company itself, you can implement different measures: more targeted marketing, price cuts, acquiring a competitor and so on.

Another strategy is product modification, meaning a modified offering in existing markets. The existing offering is slightly modified to prompt existing target groups to buy again.

It can also be a product feature, for example regarding materials used, quantity or even just the packaging.

Another possible option is product development. Compared to product modification, this goes a step further, because a new offering is introduced into the existing market. In other words, we try to meet existing customer needs in existing markets (even better) with new offerings.

Here you can also work with new brands or new product lines to signal the new product modification.

The goal here is to find or create new, but familiar, markets for products that already exist. We speak of familiar markets because the target group is known. That's what sets this point apart from the next option.

Limited diversification means modifying existing products for new geographic markets.

In the previous point, we changed nothing about the offering and moved into familiar markets with familiar target customers. With limited diversification, we modify the offering to meet regional requirements, such as linguistic, cultural, technical or regulatory ones.

And that brings us to the next option: partial diversification.

Partial diversification can take two different forms, depending on where in the matrix the growth-oriented move takes place.

You can either

>> sell new products / offerings in geographically new but familiar markets, or

>> sell modified products / offerings to the corresponding new customer segments.

9.1. In the first form, you develop and sell new products for your familiar target group in new geographic markets. A classic example is developing innovative offerings tailored to specific regional customer needs, or creating entirely new brands to address a region differently or to set yourself apart from other markets.

As you can see, this is only a minimal step beyond the previous option, limited diversification.

9.2. The other form of partial diversification, as mentioned, is the modified offering for new customers. Your existing offering is modified to meet the requirements of new customer segments.

One example would be modifying insurance products for a younger target group, or adjusting your marketing for new customer segments.

Market development means opening up new markets or customer segments for existing products.

By entering new market segments or expanding into additional geographic regions, a company can win new target groups and customers for products it already has.

This is the riskiest part of the product-market matrix.

Diversification means developing a new product and opening up a new market at the same time.

Depending on the company and the strategy, this can be broken down further into horizontal, vertical and lateral diversification.

Here there is a clear connection between the existing product range and the new product. With horizontal expansion, a company broadens its offering at the same economic level in order to reach new customers.

One example: the sausage maker who now also produces vegetarian meat substitutes.

Compared to horizontal expansion, this kind of diversification does not happen at the same level of the value chain, but upstream or downstream.

The classic example is a car manufacturer that buys a supplier of tires or accessories and also sells their products. This reduces dependencies, secures market share and drives further growth.

With a lateral (or diagonal) diversification strategy, there is no connection at all between the old and the new product-market combination.

One example would be the gas station that turns into a mini supermarket.

This is territory you may know from "Blue Ocean" strategy, which describes the creation of a new market, often innovated out of existing ones. In other words, you develop products or markets that don't exist yet.

Offering discovery

This means identifying innovative, disruptive offerings for existing or familiar markets. Fintech startups, for example, operate in familiar markets, but everything runs completely differently to make their range of services possible in that industry.

Market discovery

Market discovery means identifying future markets or customer segments for an existing, modified offering.

The classic example here is Cirque du Soleil, which essentially created a blue ocean of new market opportunities and challenged the conventions of the circus industry. From the perspective of a competition-driven strategy, the circus industry looked unattractive, but Cirque du Soleil did not win by taking customers away from an already shrinking industry that traditionally targeted children. Instead, it created an uncontested market (blue ocean) that made the competition irrelevant. It spoke to an entirely new group of customers.

Future diversification

Future diversification is about building a new, future offering for future markets. It means creating a blue ocean with little or no competition.

One example is Amazon Web Services (AWS). It is the world's most comprehensive and most widely used cloud, and today it is Amazon's main source of profit, not the book business Amazon started with or retail sales as such.

Strategic options are a genuinely exciting topic with plenty of options, as the name suggests, and often plenty of debate, as we know firsthand from our Strategie-Workshop 1.

We hope this article has given you a solid overview of all the strategic options available, plus a better understanding to build on when making the decisions that will grow your company.