The fourteen strategic options at a glance

How is the matrix structured?

Along two axes. The horizontal axis covers the offering, from scaling down to the existing and modified offering to the new and future one. The vertical axis covers markets, from scaling down to existing and known markets to new customer segments and future markets.

The combinations produce fourteen numbered options. They are sorted by uncertainty: the further you move from what you do and know today, the more unknowns the decision contains.

The matrix is an extension of the familiar product-market logic. What it adds are the two edges: the orderly wind-down on one side and the future fields on the other. Those edges are exactly what's missing from most strategy discussions.

The numbering is not a ranking. Option 1 isn't worse than Option 11, it's risky in a different way. Which one is right for you depends on your situation and, above all, on how much uncertainty you can carry at once.

Each option is described in the book with four elements: idea, execution, benefit and risk. That four-part structure is where the practical value lies, because it forces you to name the risk right away.

Which options involve scaling down?

Three, and they are the ones mid-sized companies least often examine seriously. Yet they free up the resources every growth option requires.

The third option carries the lowest risk of them all. You can calculate exactly what the exit costs and which revenue disappears. Even so, it's the least popular, because it walks back an earlier promise.

With every withdrawal, factor in the resources you free up. A cut without a named use for the freed-up capacity reads as a cost-cutting measure, not a decision.

Which options lead to growth?

Eight, and what sets them apart is mainly how much you change at once. The rule of thumb: if you make both the offering and the market new, you have two unknowns in the same equation.

Option 4 carries the most certainty and still gets skipped often because it sounds boring. More share in an existing market through marketing, pricing or buying a competitor isn't an exciting story, and it frequently has the best ratio of effort to return.

Between the two poles sit the options mid-sized companies choose most often: market expansion and market development. Both change only one variable and can be financed out of the existing business, which makes them attractive for a company without corporate reserves.

Option 11 is the opposite end. A new offering for new customers means you know neither the product nor the market. That option isn't wrong, it just needs to be run separately from the core business, with its own budget.

What are the future options?

Three options target offerings or markets that don't exist today. They carry the highest risk and are at the same time the only ones that can fundamentally shift a market position.

• Offering discovery (12). A future offering for existing or known markets. The typical case is a new operational or financial approach that makes a service offering possible at the low end of the market.
• Market discovery (13). An existing or adapted offering for future markets. Here, traditional features are dropped and others amplified so that a new experience emerges.
• Future diversification (14). A new offering for new markets, both uncertain. The riskiest option in the entire matrix.

The same rule applies to all three: they belong organizationally separate from the core business. A venture with an uncertain outcome that has to compete with day-to-day operations for attention and budget will reliably lose that contest.

In mid-sized companies, this is a question of resources, not of structure. It's often enough to free up one person two days a week and give that time its own reporting line.

How do you choose between the options?

Not by preference, but by the ratio of potential to risk. For every option you seriously consider, you assess three variables.

The potential for revenue growth or cost savings on a scale from zero to three. The possible magnitude of damage, from very low to very high. And the likelihood of that damage occurring, from impossible to very likely.

The answer is rarely a single option. In practice it comes down to a combination: one path with high certainty that delivers the means, and one path with higher risk that opens up the future. Choose only safe options and you're administrating. Choose only risky ones and you have no base from which to fund them.

Treat earlier decisions as the past. If today's infrastructure is the wrong one for the future you intend, the money invested in it is irrelevant to this decision.

What goes wrong in the selection?

Three things, and all three are visible in the completed matrix.

• The top row stays empty. Not a single exit is considered. That makes the strategy a growth plan without funding.
• Too many boxes are checked. Six parallel options mean the prioritization still hasn't happened. Three to four is the upper limit for a mid-sized company.
• The riskiest option gets the weakest rationale. The more uncertain a field, the more thoroughly you need to write down its benefits and risks. Often it's the other way around, because enthusiasm replaces scrutiny.

A fourth mistake is subtler and expensive: the same option under two names. "Open up new customer segments" and "move into medical technology" can be the same decision or two different ones. Sort that out before both end up on the list.

It also helps to fill in the matrix completely, including the options you don't choose. An empty field with a short rationale is a decision in itself, and when you run through this again in two years, it tells you why you said no back then.

At the end of the selection, every chosen option needs one sentence stating how you would know a year from now that it isn't working. Writing that sentence takes five minutes and saves you a year later on.