Reference
The Ansoff matrix: how to use it
The Ansoff matrix sorts growth options into four routes, by how new the product and the market are to you. The risk rises with each step away from what you know.
What it is
H. Igor Ansoff set out the grid in the Harvard Business Review in 1957. It is also called the product and market grid. One side asks whether the product is one you sell now or a new one. The other asks the same of the customers and markets.
The risk rises as you move away from the top left.
The four routes are selling more, new markets, new products and diversifying. Selling more sits in the top left, with the least risk. Diversifying sits in the bottom right, with the most.
When to use it
Use it when you list growth options, to check that no route has been missed. It helps most when a team has a long list of ideas and no way to compare them. It also shows when every idea sits in one corner of the grid.
The grid sorts options by risk. It does not say which option is worth most. That comes later, in a business case for each of the strongest.
How to run it
- List the options under each of the four routes. Put each idea where it sits today, before anyone argues for it.
- Note the risk. It rises the further an option sits from what you know.
- Ask what each option needs that you do not have. Name the one capability that would have to be built, bought or borrowed.
- Take the strongest into business cases. Two or three is usually enough.
Record it on the choices worksheet.
How to score each option
Rate each option on two scales, from 1 to 3.
- How new the product is to you. Score 1 if you sell it now. Score 2 if it is close to what you make. Score 3 if you would have to learn it.
- How new the customers are to you. Score 1 if you sell to them now. Score 2 if they are like your customers in needs or place. Score 3 if you would have to learn how they buy.
Add the two scores. A score of 2 sits in the top left, with the least risk. An option that scores 5 or 6 needs proof before it gets real money, such as a pilot, a partner or a small purchase. Then note the one capability each option needs that you do not have.
A worked example: a maker of commercial kitchen equipment
Illustrative: an invented business, to show the method.
A business makes ovens and fryers for restaurants and cafés in one country. Its owners want to grow, and the team has a long list of ideas. They placed each idea on the grid and scored it as the rating section sets out.
| Option | Route | Score |
|---|---|---|
| Win restaurant chains from rivals with faster delivery | Sell more | 2 |
| Service contracts for current customers | New products | 3 |
| Cool rooms bought in and resold | New products | 4 |
| Hospital and school kitchens | New markets | 3 |
| Export to a neighbouring country | New markets | 4 |
| Kitchen equipment for homes, sold online | Diversify | 6 |
The service contracts and the hospital kitchens both score 3. Each uses what the business already knows, and each needs one new skill. The contracts need field technicians, and the hospitals need a way to win public tenders. Equipment for homes scores 6, with new products and new buyers at once. The team took the two 3s into business cases and set the home idea aside.
Common mistakes
- Treating new products for new markets as one more option. It carries the most risk and needs the most proof.
- Scoring an option kindly. A product changed for a new market is a new product too. Score both scales as they are, or the risk sits in the wrong corner.
- Leaving out how to get there. Each route can be built, bought or done with a partner. The choice changes the risk and the cash an option needs.
- Stopping at the grid. The grid finds and sorts options. Each one still needs a business case before it gets money.
Frequently asked questions
What is the safest route? Selling more of what you make to the customers you serve. It still needs a reason customers would switch to you, such as price, service or speed.
Is diversifying always a bad idea? No. It needs more proof, because two things are new at once. A pilot, a partner or a small purchase tests it before the business commits.
How many options should go on the grid? As many as the team has. Score them all, then take two or three into business cases.
Where to go next
- The strategy health check, about ten minutes.
- The products and markets grid in the frameworks library, beside the other growth frameworks.
- The move guide on goals and choices.