Growth framework: the Ansoff matrix and the revenue drivers

The growth framework is a way to list every source of additional revenue for a company before comparing them. Its best-known form is the Ansoff matrix, published by Igor Ansoff in the Harvard Business Review in 1957, which crosses products (current or new) with markets (current or new).

The four boxes have names. Selling more of the same products to the same customers is market penetration. Selling them something else is product development. Selling the same products elsewhere, to another country or another type of customer, is market development. Doing both at once is diversification, the riskiest option since the company knows neither the product nor the customer.

A distinction that cuts across the four boxes is often added: organic growth, which the company builds itself, and external growth, through acquisition or partnership, which belongs to an M&A case.

The matrix reads from the top left box, the least risky, to the bottom right box, the riskiest. The further you move from what the company already knows how to do, the larger the potential can be and the less certain it is.

The penetration box deserves to be split again, because that is where the quickest gains are. Revenue in the current market is the number of customers, times purchase frequency, times average basket. Each of these three drivers is a growth option in its own right: winning customers, bringing them back more often, getting them to spend more on each purchase.

Here is the prompt. Atelier Nomade sells suitcases online, in France only, and makes €20M in revenue. Its shareholders want €40M in three years. How do you get there?

So you need to find €20M. You announce that you will quantify three options, from the closest to the current business to the furthest, and you ask for the data one piece at a time.

Selling more suitcases in France. The French luggage market is worth €500M according to the prompt, so Atelier Nomade holds 4% of it. Gaining one point of market share in three years brings in €5M. That is credible for a growing online brand, provided it accepts higher advertising spend.

Selling something else to existing customers. The brand has 200,000 active customers. A suitcase is rarely bought twice, which limits purchase frequency. A range of bags at €100 would change that: if one customer in five buys one each year, that is 40,000 bags and €4M.

Selling the same suitcases in Germany. The prompt gives an €800M market. Aiming for 1.5% in three years, less than half the share achieved in France, represents €12M.

Recommendation. The target is within reach, but more than half of the gain depends on Germany, which is also the most uncertain option and the slowest to deliver. Atelier Nomade should therefore launch it in the first year and fund that launch with the other two, which are safer and faster. If Germany only reaches half of its target, the total falls to €15M: better to tell shareholders now and keep a second country in reserve.

The matrix breaks because it lists without ranking. Four boxes full of ideas do not make an answer: the interviewer wants to know how much each option brings in, how fast, for what investment, and which one you launch first.

It also breaks when the problem is not a lack of ideas. If the company is losing customers faster than it wins them, the first source of growth is to stop the leak, which no box mentions. Before looking for new revenue, check that current revenue is solid.

Third limit: it talks about revenue, not profit. Doubling sales by selling at a loss in a new country is not a success. A growth case almost always ends with a margin check, and therefore with a detour through the profit tree.

Finally, the border between boxes is blurry. Is a bag sold to the customers of a suitcase brand a new product or diversification? The question is of no interest. What matters is what the company already knows how to do and what it has to learn.

Use the matrix to check that you are not forgetting anything, not to present your answer. What you announce to the interviewer is a quantified target and how you are going to fill it.

1. Quantify the gap. "We need to find €20M in three years." Everything that follows is measured against that number.
2. Start from the client's revenue equation, written in its own words: customers x frequency x basket. The drivers closest to the current business come out of it naturally.
3. Add the more distant options, new products and new markets, asking yourself what the company has that is distinctive to bring to them.
4. Give each one an order of magnitude, with a simple assumption that you state. If the prompt does not give the size of a market, you estimate it as in a market sizing exercise.
5. Rank them by gain, by timing and by risk, then say where you start.

This is the approach the FrameLab course applies to every case: a driver tree to break down the number, a segmentation to spot where the potential lies, and a structure that changes from one case to the next. A restaurant chain, a software company and a suitcase brand do not have the same drivers, even though all three "want to grow".

A city-centre climbing gym, full on evenings and weekends, wants to increase its revenue by 30% without moving. In two minutes, list the levers you would study, in order.