A market expansion strategy is fraught with risk.  Yet it can be the key to organic growth. One of the ways to step more safely into a new market is to employ an adjacent market strategy. Developing and pursuing effective market expansion opportunities is one of the core competencies of Marketing.

What should you look for leverage a market expansion strategy? A viable opportunity is one that meets all 3 of these criteria:

• fits with who you want to become as a company
• involves an attractive market
• takes advantage of a competitive opening 

Because markets evolve quickly, you need to continuously engage in the process of seeking, evaluating, and committing to new opportunities.  Our popular article on using segmentation to fuel organic growth generated a number of questions, including, “How do we generate ideas for ‘good business’ in the first place?” So, this article outlines the two key steps to achieving this goal.

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Seek Core Business Adjacencies

When we work with customers seeking growth based on market expansion, we use the “Adjacency” approach as presented by Chris Zook of Bain & Company in his book, Profit from the Core, Growth Strategy in an Era of Turbulence. His approach is based on the fundamental premise that successful market strategies start with protecting the Core Business through seeking growth in Core Business adjacencies.  Through adjacency expansion, your organization moves into related segments or businesses that utilize and, usually, reinforce the strength of your profitable core.

The approach we use encompasses the following broad steps.

1. Define all of the dimensions of doing business in markets related to your Core Business. 
2. Map of possible growth opportunities as you move outward from the Core in each dimension, for example, new geographies, channels, products, and customers.
3. Assess and choose the right adjacencies.

How Do You Identify Adjacent Business Opportunities for Market Expansion?

After you select the dimensions and create the map, the crucial step is to identify potentially viable adjacent market opportunities. Start this process by examining the following:

• Adjacent markets you are already serving. Evaluate how well you are doing in these markets in terms of revenue, market share, and profitability.
• List adjacencies your organization has previously considered or rejected and determine if the reasons for the decision are still relevant.
• Identify other existing adjacencies you know of that would require two or more strategic moves, such as addressing creating a competitive advantage related to quality, innovation, or customer experience, or adjacencies that competitors are pursuing.
• Consider what potential adjacencies might emerge due to a technology advancement, or other market or economic development.

After completing this step, it is very possible that you will have a long list of possibilities. We have found that a screening process is necessary to winnow down the list.

How Do You Assess and Choose the Right Adjacencies?

We recommend a three-step approach to identify the ideal adjacent market opportunities to support a market expansion strategy.

1. Hone in on which adjacencies merit further investigation. To accomplish that, we suggest diving more deeply into a potential adjacency based on how well it meets these five criteria. Then remove any adjacencies that fail on two or more of these criteria from your list.

2. Establish 5-10 specific success criteria for each of the adjacencies that remain on your list and therefore warrant further assessment. For example, you may want a target profit margin, a target market growth rate, a capital investment threshold, and so on.

You are going to need to conduct research to ascertain how well each potential adjacency stacks up against each success criterion.  Decide on your assessment schema and the minimum overall rating a potential adjacency must have in order to make it to step three. For example, you can use high, mediu,m and low. Or a 1-10 scale. You will need to specify exactly how you will decide high, medium, low, or the numerical score. We recommend creating a spreadsheet or table such as this:

After you complete your research and have completed the table, select the adjacent markets that achieve the overall minimum “score”. This is the group that will be put through the paces associated with step three.

3. For each of the high-potential adjacent markets, prepare a plan of action document. This should be a relatively deep dive into each of the potential opportunities and should address at least four areas:

• Why is this an attractive market for your company? Be specific about market size, growth rate, pricing trends, competitive landscape, operating environment, and so on.
• What it would take to win in this market. You’ll want to be able to answer questions such as: What customers would you have to acquire, and how many? From which influencers you would you need support? If your target prospects are doing business with a competitor, what would it take for them to switch?
• What strategy could you employ to succeed in this market? In this section, be sure to address knowledge, skills, and all investments needed to execute the strategy.
• Recommendation for market entry.

The ability to identify, assess, and choose adjacencies to fuel growth is essential for the majority of companies today. But it can be challenging due to resource requirements, pre-existing biases, and a lack of experience in this specialized process. If you have started, or are considering starting, a project in this area, contact us to explore how we can help you effectively expand to other markets.

FAQ:

1. Fits who you want to become as a company (strategic direction and identity)
2. Involves an attractive market (size, growth, economics)
3. Takes advantage of a competitive opening (a winnable gap)

1. Define the dimensions of doing business in markets related to your core (e.g., geographies, channels, products, customers).
2. Map growth opportunities outward from the core across each dimension.
3. Assess and choose the right adjacencies using a disciplined screening and evaluation process.

• Adjacent markets you already serve (and performance by revenue, share, profitability)
• Adjacencies previously considered/rejected (and whether the old reasons still apply)
• Adjacencies requiring multiple strategic moves (e.g., quality, innovation, CX advantage) and those competitors are pursuing
• New adjacencies emerging from technology, economic shifts, or market developments

1. Hone in on adjacencies worth deeper investigation: Evaluate against five criteria and drop options that fail on two or more.
2. Define success criteria (5–10) for remaining options: Examples include target profit margin, market growth rate, capital investment threshold, and other strategic requirements.
3. Research and score each adjacency: Use a defined scoring schema (e.g., high/medium/low or 1–10 with explicit definitions), select those meeting the minimum score, then produce a deeper plan of action for finalists.

1. Why the market is attractive (size, growth, pricing trends, competitive landscape, operating environment)
2. What it would take to win (customers to acquire, switching requirements, influencer support, competitive displacement)
3. What strategy you would employ (knowledge, skills, investments, execution requirements)
4. Recommendation for market entry (how to enter and with what assumptions)

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