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Between defining and redefining a core business lies the second element of our growth strategy, adjacency expansion from the core. Adjacency expansion is a company's continual moves into related segments or businesses that utilize and, usually, reinforce the strength of the profitable core. Critical to improving the odds of profitable, sustainable growth are:
  1. Identifying adjacent business opportunities and recognizing the most common patterns
  2. Assessing and choosing the right adjacencies
  3. Avoiding some common pitfalls of adjacency expansion.
What makes adjacency expansion different from other growth strategies is its use of existing customer relationships, technologies or core business skills to build competitive advantage in a new area.

Companies pursuing new growth initiatives without jeopardizing a strong core can benefit from methodically inventorying and mapping out their adjacent opportunities.

Map your growth opportunities

The process of mapping does more than just help organize opinions and inventory ideas. It reveals the extent to which the organization has a multiplicity of choices for growth and makes it easier to understand the trade-offs that may need to be made in choosing which to fund. In the absence of such a process, organizations often lack an agreed-on big-picture context for making decisions, fund an excessive number of initiatives to an insufficient extent, and take too seriously the "idea of the day".

There are many different processes to map out and characterize the full range of business adjacencies. The following is an example of one way to map your adjacencies.

Step One: Define your cores. Rank them from strongest to weakest based on economics and relative competitive strength. Rank them also according to the richness of adjacent growth opportunity from "limited" to "unlimited." Identify the core that should be the highest priority for growth, balancing these two factors.

Step Two: For the strongest core(s), map out adjacencies in more detail using the following type of sequence.
  • Identify the adjacencies you are already in and array the data on how you are doing there (market share, profitability, investment)
  • Identify the adjacencies the organization is considering or has rejected
  • Identify other known adjacencies, possibly requiring two or three strategic moves to get there
  • Identify adjacencies suggested by studying investment action of competitors
  • Identify adjacencies suggested by potential new competitors, often small companies
  • Identify future adjacencies due to technology or other developments
Put these adjacencies on a single grid or map like these examples and push the thinking on what is missing.

Step Three: Do a quick ranking or rating of each adjacency. This will result in a ranking along the following types of measures: 1) potential size, 2) strength of advantage due to the uniqueness of the core, 3) strength of probable competition, 4) offensive and defensive importance to the core (warding off invaders), 5) a longer term perspective on multi-step moves, 6) ability to implement.

Step Four: Develop cluster of moves, or strategic scenarios

Step Five: Determine implementation phases within each scenario. Assign time periods against each.

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