Ansoff Matrix: what it is and how to use it in product strategy
Do you know what the Ansoff Matrix is? This framework is very useful for Product Managers and Product Leaders who need to make strategic…
Do you know what the Ansoff Matrix is? This framework is very useful for Product Managers and Product Leaders who need to make strategic decisions about the future of products also avoid wasted resources.
In this article, we will explain what the Ansoff Matrix is, what this tool is for, how to structure it and how to use this framework in the day-to-day Product. Good reading!
What is the Ansoff Matrix
The Ansoff Matrix (also known as the Product-Service Matrix) is a tool that helps Product teams in strategic planning and in defining the company’s goals.
It is a framework that allows you to optimize results and discover what your business needs for healthy long-term growth. In this sense, this tool helps in elaborating the company’s goals and strategies, as well as helping managers understand the organization’s growth potential.
The Ansoff Matrix takes its name from its creator, the Russian engineering professor and strategic management expert Igor Ansoff, who proposed that companies adopt an external and an internal perspective to solve problems.
For this, the professional proposed the matrix model so that the businesses consider their own context and the market context in their strategic decisions.
But what exactly is this tool used for? That’s what we’re going to understand next!
What is the Ansoff Matrix for?
We separate some utilities and benefits of the Ansoff Matrix for digital product companies. Check out!
Know the business in depth
The Ansoff Matrix increases the awareness you have about each element of the business, understanding the impact of your product on the market and its users, making you better understand which needs need to be met. From all this knowledge, it is possible to focus on the company’s tactical planning and product strategy to achieve better results.
Identify the company’s needs
Ansoff analysis is a clear and objective way to identify your customers’ pain and market gaps. In addition, this framework is also very useful for discovering points of improvement in the company and identifying the weaknesses and strengths of the organization.
Create a successful plan for the future
The Ansoff strategy helps teams create action plans based on the insights generated by the matrix, which brings more clarity to the strategies that must be carried out. The tool also allows better visualization of the planning and offers more security for teams to make decisions based on real data about the business and the market.
Optimize business results
With strategies more aligned with the needs of the company and the market, the trend is for teams to optimize results and contribute to the growth of the business in a healthy way.
Now that you understand what benefits the Ansoff Matrix brings to your company let’s see how you can build this model and start using it to optimize your results!
Ansoff Matrix Structure
The Ansoff Matrix is divided into 2 axes (markets x products) and 4 quadrants, (considering existing and new markets and existing and new products), as in this image:
Let’s see what each of these elements consists of:
Market penetration is the sum of an existing market and an existing product. This strategy aims to increase the company’s market share, expand its customer base, and retain users;
Market development is the sum of a new market with an existing product. In this case, the objective is to conquer new markets with the solutions that the company already produces;
Product development is the sum of a market that already exists with the creation of new products. In this case, the objective is to increase the company‘s product portfolio and sell them to a market in which it already operates;
Product diversification corresponds to the sum of new markets with new products, with the objective of expanding the market and increasing the portfolio of products offered to reach more people.
The objective is to cross-reference the information to identify new opportunities and make the most of what the company already does or set out to conquer new markets.
The matrix aims to help establish business growth metrics to ensure the return on investment, from creating a diversified portfolio, the development of existing and new products, and conquering the market according to the company’s needs and strategy.
You can create your matrix in an Excel document or use more visual tools such as Canva and Miro . The most important thing is that this is an accessible file for the team.
How to use the tool in product strategy
Companies that work with digital products can benefit greatly from the Ansoff Matrix, as it is a tool that can help bring product and business strategies closer together.
Considering the market development quadrant, the company may decide to internationalize the solution, for example. In the quadrant referring to market penetration, the strategy can be to win over competitors’ customers and increase the number of users.
On the other hand, considering the development of new products, the company can identify new user needs and decide to create more functionality to make the solution more robust.
Now, thinking about diversification, it is possible to create products or even a new business that has to do with what the company already does (and in this case, it is the related diversification process), such as creating products or a new business that does not necessarily have a link with the previous ones (unrelated diversification).
To complete the matrix, gather the necessary information about the business and the market and evaluate the data of your segment to identify opportunities. For this, market research and benchmarking are very efficient strategies.
But it is also important to look inside the company, identify which products in the portfolio are better evaluated (with more positive feedback), and user suggestions that may represent opportunities to optimize the solution with more functionality and that help to understand the tastes of customers to create new products. Brainstorming sessions with the Product team are also very useful when filling in the quadrants of the framework.
The idea is that, based on the results collected by the matrix, the Product team evaluates the scenario that makes the most sense for the moment of the business. In this sense, the tool can expand the company’s possibilities, open the team’s mind to market opportunities and optimize perspectives in relation to the challenges that arise.
A tip to take advantage of the Ansoff Matrix, even more, is to combine it with other tools, such as the SWOT analysis, which helps teams identify the company’s strengths and weaknesses, as well as market opportunities and threats.