The Five Dimensions Of Business Development
When I am talking with startups to discuss potential consulting work, I am usually asked to write a few words and explain how I would think about growing their business. While I am becoming increasingly weary about preparing written material in such circumstances, I often discuss something simple, very high level but which gives a good indication about how I put together a Business Development strategy.
There are a few known approaches to this subject, the most famous of which probably being the Ansoff Matrix below:
It is a nice and simple 2x2 matrix looking at the combination of existing and new products, with existing and new markets. Risk increases with the number of new areas a company decides to approach – new products in new markets being the riskier decision.
However, I often struggle with this kind of frameworks, so popular in business school classrooms. All are a good starting point, but usually too limiting. The Ansoff Matrix is no exception, as it misses some critical variables.
When thinking about creating a business development plan, I like to go beyond this matrix and thing about 5 key decision areas: Markets, Industry, Products, Business Model and Buy vs Build.
Markets & Industry
It is always good to make a distinction between market and industry. Expanding to new markets can mean new countries or market segments (eg SME vs Large Enterprise, male vs female, young vs mature, etc). But the Ansoff Matrix assumes this is always within the same industry or vertical. At least, it doesn’t differentiate between staying in the same industry or expanding to a new one. I often like to think about the possibility of staying in the same market but expanding to new industries. Some examples where this makes sense: a 3D gaming engine company may want to consider using their technology in the health or real estate markets, particularly now with Virtual Reality becoming such a hot trend; another example, a video creative agency focused on gaming clients may want to consider clients in other verticals, fashion and auto being two examples. Another popular example? Online betting expanding to eSports.
Products
In some cases, launching a new product may be an option to grow your business. If demand for your current product is stagnating (market saturation, competitive pressure, strong alternatives, old technology, etc) it is always good to assess your own strengths and consider launching a new product. Apple, for instance, excels in doing this, not only within the same market/industry (launching improved versions of existing products every year) but also in new ones (iTunes, iPod, iPhone, iPad, Apple TV and recently the Apple Watch).
Business Model
This is an option that is usually left out of the discussion. Which is unfortunate, because it can be one of the easiest ones as it may not require expanding to new markets and industries, or even launching new products (although some product development and tweaks may be necessary). Hollywood excels in this area. Just look at the variety of ways a movie is sold, each with its own business model (theater release, home entertainment, EST, TVOD, SVOD, Pay TV, Free TV). The software industry is another one which is embracing this approach. One of the most current examples being Adobe, which moved from sales of packaged software to a subscription business model in a very successful way.
Buy vs Build
Whether you are thinking about moving to a new market or industry, launching a new product and (possibly not as relevant) changing your business model, you should ask yourself HOW to get there. You can: (1) build internally the additional required resources, (2) identify companies out there that would help you meet your goals and attempt to establish a strategic alliance, or (3) acquire them. The latter falls under the “corporate development” label, not necessarily business development, so I will not dwell on it for long in this article. However, in most cases I have a really hard time being convinced that an acquisition would be a better solution than a strong strategic alliance. This is, in fact one of my favorite business pet peeves (another one is when Business Development roles have a sales target...) Of course, there are some successful acquisitions, but in most cases they are not and fail for a variety of reasons. If M&A is an option, please make sure it is indeed the best option! As for the decision between building internally or seeking a strategic alliance, it is necessary to think about the risk/reward scenarios associated with both options, as well as how much control of a potentially critical part of your growth you want to leave in the hands of others.
So, next time you are thinking about growing your business, consider all these questions. Shall you expand to a new market or try a different industry? Does your portfolio need innovating products? Is the market moving in a different direction in terms of business model? If not, can you diversify your revenue stream by implementing a different way to sell your products? And how can you achieve all this? Do you have the capital resources to build everything you need internally? Or should you partner with another company, or even consider an acquisition?
Good luck!