> Strategy Tools > The Ansoff Matrix

Motivating Your Team How Good are Your Motivation Skills? Motivating Your Team: How to motivate your people Theory X and Theory Y: Understanding team member motivation McClelland's Human Motivation Theory: Discovering what drives members Herzberg's Motivators and Hygiene Factors: Learn how to motivate your team Sirota Three-Factor Theory: Keeping employees enthusiastic Expectancy Theory: Motivate your team by linking effort with outcome Using Maslow's Hierarchy: Building a happier, more satisfied team Alderfer's ERG Theory: Understanding the priorities in people's needs Pygmalion Motivation: Managing high performance with high expectations Amabile and Kramer's Progress Theory: Using small wins to enhance motivation Handy's Motivation Theory: Motivating people to work hard Rewarding and Engaging People Understanding Strategic Compensation: Creating the right pay structure The Psychological Contract: Meeting your team's unspoken expectations Adams' Equity Theory: Balancing employee inputs and outputs Hackman and Oldham's Job Characteristics: Understanding job enrichment

Rewarding Your Team: Learning why "Thank You" is so vital Job Enrichment: Increasing job satisfaction Keeping Valued Team Members: Restoring commitment to prevent resignations Re-Engaging Team Members: Turning negative back to positive Motivating Without Bonuses: Keeping your team happy without a check Theory Z: Merging Eastern and Western management styles Helping People Take Responsibility: Encouraging accountability Performance Management Performance Management and KPIs: Linking activities to vision and strategy Management by Objectives (MBO): Motivating people with organizational goals Performance Appraisals: Getting real results from performance reviews Dealing with Poor Performance: Is it lack of ability or low motivation? Performance Agreements: Increasing personal accountability The Inverted-U Model: Balancing pressure and performance The Drexler/Sibbet Team Performance Model Delegating Effectively How Well Do You Delegate? Successful Delegation: How, when, why The Delegation Dilemma Avoiding Micromanagement: Helping team members excel on their own

The Ansoff Matrix

Understanding the risks of different options (Also known as the Product/Market Expansion Grid)

Selling new products to your existing market is only one growth option. iStockphoto/alexsl

Successful businesspeople spend a lot of time thinking about how they can increase profits. Theyll typically have hundreds of ideas about things they could do, including developing new products, opening up new markets and new channels, and launching new marketing campaigns. In the same way, people within organizations often have many different ideas about how they want to progress their careers. Perhaps they want to develop new skills, move into new roles, and even work in new industries. Thats great! But, if this describes you, which of these ideas should you choose? And why? This is where you can use a strategic approach, such as the Ansoff Matrix, to start screening your options, so that you can narrow these down and choose the ones that best suit your situation.

Understanding the Tool

The Ansoff Matrix was first published in the Harvard Business Review in 1957, and has given generations of marketers and business leaders a quick and simple way of thinking about growth. Sometimes called the Product/Market Expansion Grid, the matrix (see Figure 1 below) shows four ways that businesses can grow, and helps people think about the risks associated with each option.

The Matrix essentially shows the risk that a particular strategy will expose you to, the idea being that each time you move into a new quadrant (horizontally or vertically) you increase risk.

The Corporate Ansoff Matrix

Looking at it from a business perspective, the low risk option is to stay with your existing product in your existing market: you know the product works, and the market holds few surprises for you. However, you expose yourself to a whole new level of risk by either moving into a new market with an existing product, or developing a new product for an existing market. The new market may turn out to have radically different needs and dynamics than you thought, and the new product may just not be commercially successful. And by moving two quadrants and targeting a new market with a new product, you increase your risk to yet another level!

Personal Ansoff
Looking at this idea from a personal perspective, just staying where you are is often a low risk option. Switching to a new role in the same company or industry, or changing to a similar job in a new industry is a high-risk option. And switching to a new role in a new industry has an even higher level of risk!

This is shown in Figure 2, below.

Tip 1: Interpret this according to your circumstances. For example, an accountant may find it easy to switch from one industry to another. But a salesman doing this may lose contacts that would take years to rebuild. Tip 2: Don't be too scared by risk if you manage it correctly (for example, by researching carefully, making contingency plans, building appropriate skills, and suchlike), then it can be well worth taking quite large risks.

How to Use the Tool

Use of the tool is straightforward: 1. Start by downloading either our free Corporate Ansoff or Personal Ansoff worksheet. Then plot the approaches you're considering on the matrix. The table below helps you think about how you might classify different approaches. Market Development Diversification

Here, youre targeting new markets, or This strategy is risky: Theres often little new areas of the market. Youre trying scope for using existing expertise or for to sell more of the same things to achieving economies of scale, because different people. Here you might: you are trying to sell completely different products or services to different customers Target different geographical markets at home or abroad. The main advantage of diversification is Use different sales channels, that, should one business suffer from such as online or direct sales if adverse circumstances, the other may you are currently selling not be affected. through the trade. Target different groups of people, perhaps with different age groups, genders or

demographic profiles from your normal customers. Market Penetration With this approach, youre trying to sell more of the same things to the same people. Here you might: Advertise, to encourage more people within your existing market to choose your product, or to use more of it. Introduce a loyalty scheme. Launch price or other special offer promotions. Increase your sales force activities. Buy a competitor company (particularly in mature markets). Product Development Here, youre selling more things to the same people. Here you might: Extend your product by producing different variants, or packaging existing products it in new ways. Develop related products or services (for example, a domestic plumbing company might add a tiling service after all, if customers who want a new kitchen plumbed in are quite likely to need tiling as well!) In a service industry, shorten your time to market, or improve customer service or quality.

2. Manage risk appropriately. For example, if you're switching from one quadrant to another, make sure that: You research the move carefully. You build the capabilities needed to succeed in the new quadrant. You've got plenty of resources to cover a possible lean period while you're learning how to sell the new product, and are learning what makes the new market tick. You have firstly thought through what you have to do if things don't work out, and that failure won't "break" you.

Tip: Some marketers use a nine-box grid for a more sophisticated analysis. This adds "modified" products between existing and new ones (for example, a different flavor of your existing pasta sauce rather than launching a soup), and "expanded" markets between existing and new ones (for example, opening another store in a nearby town, rather than going into online sales). This is useful as it shows the difference between product extension and true product development, and also between market expansion and venturing into genuinely new markets (see Figure 3). However, be careful of the three "options" in grey, as they involve trying to do two things at once without the one benefit of a true diversification strategy (escaping a downturn in one product market).

You can learn 700 similar skills elsewhere on this site. Click here to see our full toolkit. If you like our approach, you can subscribe to our free newsletter, or become a member for just US$1.