In many conversations with senior product leaders, I have found an overwhelming number of them do not think their product managers are good at thinking strategically about growth. Many are very good at managing the existing product in their existing market, but when growth tapers off, they struggle to find the next growth curve.
Now we could have an entire conversation around product lifecycle management based on this. Still, I am going focus on some basics of Growth Strategy that any product manager (or strategy professional) could use to help revive an existing growth curve or start a new growth curve.
Ansoff's Growth Strategy Matrix
To start thinking strategically about growth, start by considering Igor Ansoff's Growth Strategy Matrix.
The Growth Strategy Matrix is built around the concept that organizations sell "products" into "markets." For each you can grow in Existing or New, creating four (4) generic growth strategies:
Market Penetration - Growing with Existing Product in the Existing Markets they are currently selling.
Market Development - Growing by taking Existing Products into New Markets.
Product Development - Growing by taking New Products into Existing Markets. And
Diversification - Growing by building a New Product for a New Market.
The right Growth Strategy for your company is based partly on your differentiating capabilities. If you are good at understanding your Existing Market, identifying un- or under-met needs, and developing products that address those needs - Product Development may make sense.
If you have your value proposition nailed and are good at marketing and sales and can take Existing Products into adjacent markets - Market Development may make sense.
Diversification is often the most challenging option, but if you find yourself in a unique situation where Diversification may be your best choice, build your strategy based on differentiating capabilities, you can leverage to provide value.
In addition to your core capabilities, the right Growth Strategy also depends on the current situation.
The Importance of Market Dynamics
While thinking about growth, you need to also consider the current situation inside your company and in the market.
You should use the current situation inside your company to filter and evaluate growth opportunities. I will get deeper into that at another time. For now, I want to focus on the current situation in the market, specifically market dynamics, as it is the most significant market-focused element in growth strategy.
There are two essential components of market dynamics to consider. The first is where your market is in its maturity lifecycle (Inception, Growth, Maturity, Decline).
The second is what your market position is in that market (Leader, Challenger, Follower).
Once you have these defined, you can start to identify what the right growth strategy is for the current market dynamics.
Situational Growth Strategy Matrix
To help you determine your best growth strategy options, I created the 'Situational Growth Strategy Guide.' It offers recommendations on where to focus on growth based on your market maturity and market position.
For maturity, we have broken the growth into two phases. The first is Early/Hyper Growth; this is where the hockey stick happens. The second is Late/Stable Growth; this is where the market may still be growing fast on an absolute basis, but the exponential growth has turned into strong double-digit growth. So, the options are Inception, Early/Hyper Growth, Late/Stable Growth, Maturity, and Decline.
For Market Position, we have broken out three options. A Leader is the clear #1 player in that specific market. A Challenger is a company that is #2 in the market and who is genuinely challenging the Leader for the #1 position. A Follower is #2 by a decent to large margin and everyone else.
Based on these two factors, where you should focus on growth is logical.
Situational Growth Strategy Matrix
Once growth has started to stabilize, the market positions become more stable. Because of this, your growth strategy should be different depending on your market position. If you are the Leader, your strategy should be different than if you are a Challenger or Follower.
As your market matures, Late/Stable Growth through Decline, you will notice that there are two areas recommended for growth. Optimizing your Current Curve and Starting your Next Growth Curve.
I recommend that you should always have at least two growth strategies, though no more than three. Through Inception and Early/Hyper Growth, those two strategies will focus on Market Penetration. In comparison, later in maturity, we may balance one or two Market Penetration Growth Strategies with another Strategy that focuses on starting the next growth curve.
Now one critical warning before you look to apply this to your growth strategy. If your market and/or performance has had significant changes recently, you may need to take a step back to review the current situation. These Situational Growth Strategies may not be applicable.
The changes could be a significant increase or decrease in lead conversion, close or retention rates, a substantial shift in market share/position, or a disruptive new entrant in the market. (Or it could also be a global pandemic and the economic fall-out of it).
If you have been experiencing one or more of these, your market is likely in the midst of disruption or a significant transition, and you should treat your current situation as it is in Inception.
Applying These Growth Strategy Concepts
With a good understanding of the four generic growth strategies from Ansoff's Growth Strategy Matrix, the importance market dynamics have on guiding your growth strategy, and an understanding of the Situational Growth Strategy Guide, you are ready to go.
Think about your current market dynamics. Are you a Leader, Challenger, or Follower? In which phase of maturity is your market?
Based on these two answers, what is your recommended growth strategy? You might also be interested in downloading our free eBook "9 Steps to an Effective Product Strategy" to learn how to close the strategic business skills gap.