Expand revenue opportunities – methodically and safely

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Expand revenue opportunities – methodically and safely

Use this simple framework to uncover new revenue opportunities and assess levels of risk.  

I’m writing this during the shelter in place days of the Coronavirus.   My clients are maximizing cash and waiting it out. Most are still doing business.  A few are busier than ever but most are seeing reduced activity.

Naturally, in times like these, a business owner’s thoughts turn first to what more can be sold in the current scenario and then to what might be a successful new product or a new market for the longer term. This is a great exercise when commerce is disrupted and it is no less valuable when the economy is strong. 

If that’s on your mind I want to offer a simple framework to help you and your team organize your discussions and analysis. The 4-quadrant framework has two variables: customers/markets/channels (existing and new) and products/services (existing and new).  Here’s what it looks like.

Quadrant 1 is very safe because you’re not venturing away from what you know and who you know. You’re attempting to sell more to customers with whom you already have a relationship. Although you may believe you have already tried everything I suggest you dig deeper. This is usually an area we don’t explore thoroughly enough, preferring instead to look farther afield in Quadrants 2, 3 and 4 where ideas are exciting … and there’s more risk, as explained below. 

Quadrant 2 is more risky because you are approaching new customers and markets.  The risk is mitigated by the fact that you’re continuing to offer products and services that are within your existing capabilities. That’s a big deal. It’s safer to live within your capabilities than to venture into new product/service areas. 

Quadrant 3 is also more risky. Here you’re attempting to provide something that is not within your current portfolio of offerings and therefore presumably not at the center of your current capabilities. New products and services are harder to create and deliver successfully than one would think at first glance. Time and again companies believe it’s not a problem and then it is.  

Quadrant 4 holds great opportunity and tremendous risk. There’s the exciting possibility that you’ll hit the jackpot with some new (for you) product or service that a new (for you) market loves. It’s fun to think about. But sadly the odds of success are slim and the chances that your company gets hurt in the process are high. After all, you’re moving completely away from what and who you know – your core business. It’s like Caterpillar Equipment launching ice cream shops. Well, that may be an exaggeration but you get the point.  

Begin by fully exploring opportunities in Quadrant 1, your core business, and then move on to quadrants 2, 3 and 4. A great book on the topic by Chris Zook at Bain Capital is Profit from the Core. The author does an excellent job of explaining the benefits of sticking with your core business and the risks of going outside it to what he calls adjacencies.  

Having said all that it is helpful to think through all possibilities in all quadrants.  Use this framework to structure your conversation and after you come up with some promising ideas write them in the quadrants to give you a visual picture of the opportunity and risk.

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