Ansoff Matrix
The Ansoff Matrix lays out four ways to grow - sell more of what you have, reach new markets, build new products, or diversify - ordered from safest to riskiest.
Four boxes set existing against new, product against market, ordered from safest to riskiest.
Reach for this when…
- The board wants growth and you need to show the options and their relative risk.
- You are tempted to chase a new market and a new product at the same time.
- Two leaders are arguing for different growth bets and talking past each other.
How to run it
- Start where you are: existing products, existing markets. What is the cheapest growth still available here (penetration)?
- Look sideways: could existing products win in new markets or segments (market development)?
- Look forward: what new products would your existing customers buy (product development)?
- Only then consider diversification - new products for new markets - and price in the risk.
- Sequence the bets. Bank the low-risk growth before funding the high-risk kind.
A worked example
Situation. Minh Tran, who roasts and sells coffee as Trung Coffee in Hanoi, Vietnam, wanted to double revenue in three years.
Applied. Ansoff laid out three routes before the risky one: sell more through his own cafes, supply local restaurants, and launch a home-subscription bag.
Result. He took penetration and market development first, funded the subscription line from the profit, and left diversification well alone.
The catch
The four boxes look equally weighted, but the top-right corner - diversification - is where most growth money dies. The tool ranks risk without measuring it for you. And 'new market' hides a lot: a new city is not a new country.
Doing two boxes at once doubles the unknowns, not the growth. Change one variable at a time where you can.
Origin: H. Igor Ansoff, 'Strategies for Diversification', Harvard Business Review, 1957