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Is your idea viable? How do we model it?

Examine a process for taking an inspirational idea (a dent) and transferring it to a framework for growth.

In 1957 a Russian American, Igor Ansoff, proposed a simple model for understanding possible business expansion.

Ansoff’s idea was to set down two very simple principles of growth:

  • the idea that a company can venture into new markets – a development

  • the idea that the same company can exploit current markets with new ideas.

This very simple matrix (shown below) gives us four possible combinations for growth:

Ansoff model

  1. Market penetration – where the company is looking to expand in its current markets, based on the current product portfolio.

  2. Market development – where new markets are being assessed, but with the existing products.

  3. Product development – where existing markets are being targeted with new products.

The last sector, defined by both new markets and products, was originally termed ‘diversification’ by Ansoff. But you can see how this is close to our ‘blue ocean’ theme – where the company really is looking at an area that it has no experience of. Not surprisingly Ansoff thought this to be the most risky of all possible expansion – but this is exactly where entrepreneurs like to operate.

Ansoff’s model has its critics – as it is a very simple view of how companies can operate. In some cases a firm will use a combination of the three supposedly easier quadrants – and reserve the fourth for small ‘test ventures’. You can also use this model to test if other companies already exist in the sector that is under consideration for expansion.

Your task

In which quadrant do you think that your business idea might fit? Are there other companies with similar ideas that already exist in this sector?

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This article is from the free online course:

Business Model Thinking

Coventry University