The product-market matrix is a classic strategy tool. It can be used at the beginning of an innovation process to narrow the search field and discuss the innovation strategy.
The product-market matrix was developed by Harry Igor Ansoff. It assumes that a company’s growth opportunities are defined by its situation on the sales market and by its products. Successful growth strategies change either the situation of the product on the market or the product itself.
The matrix describes four dimensions of change:
1. market penetration
This dimension is about increasing share in an existing market with an existing product. This growth strategy is used very often. As a rule, idea generation in the innovation process focuses on marketing or sales tools.
2. market expansion
The aim here is to address a new market with an existing (old) product. These can be new countries or new target groups, for example.
3. product development
The third dimension occurs when a new product meets an old market. In this case, either the range is expanded or the product is replaced. This is often the case in technology industries, where new models replace old ones.
4. diversification
This is a growth strategy that founders in particular use. In doing so, a company offers new products on new markets, thus expanding its portfolio on several levels at once. Diversification is associated with great growth potential, but also with high risks.
