Most companies have growth ambitions, since the only alternative in the growing IT market is decline into irrelevance. To achieve growth that outpaces the market as a whole, a technology and service provider has to change strategy to pursue and capture opportunities.
Our research into growth strategies in the IT industry shows that providers can choose from numerous possible growth opportunities by changing their product portfolio and target markets to differing degrees.
We found that each approach to growth has its own difficulties and risks, suits a different kind of provider and requires particular investments to achieve. To make best use of corporate strengths and focus on the greatest opportunities for growth, providers should step back and methodically consider, at a high level, all the options available to them before deciding which to investigate further.
Nine strategic alternatives
The following nine strategic alternatives for growth will help technology and service providers explore the solutions they offer and which markets they sell to. Our research has identified good and bad examples from the IT industry for all of them.
- Market penetration: Sell your existing product portfolio to existing target markets — but grow by capturing increased spending from current customers and acquiring new customers within the existing market.
- Product extension: Modify current products, but still sell them to existing markets. Product options, variants and extensions can make current core products more appealing to new parts of target segments, without making a drastic departure from your existing portfolio.
- Product development: Sell entirely new products to existing target markets. Your trusted brand may open doors to bring additional, adjacent, products and services to those customers.
- Market extension: Continue to sell current product portfolio unchanged, but expand target markets to include related areas, thereby growing the pool of potential buyers.
- Targeted differentiation: Combine a limited portfolio expansion with an extended set of target markets. By defining the market more broadly and then segmenting it, it may be possible to create product or service variants that meet the needs of segments not currently served or not well-served.
- Development for market extension: Take a market you know well, but expand its scope and offer a significantly new product or service.
- Market development: Sell existing products into entirely new markets – verticals, different sizes of business or new regions, particularly emerging markets.
- Extension for market development: Enter a new, significantly different market with an existing product that has been adapted for this market.
- Diversification: Develop a new product or service for a new IT market that is only loosely linked to your current business, technology or general market area.
Prepare for growth
This is fundamentally a comparative exercise because there are many possible strategies that you can identify or create, yet only limited budget.
You will have certain fixed boundaries: corporate growth targets, associated expectations of shareholders; as well as available budgets for marketing, sales and product development. Within these boundaries, compare the relative attractiveness of different growth options in terms of size, risk, and accessibility, to decide on which options to invest in.
Validate these opportunities not just against whether they're good enough to pursue and whether you have the capabilities to pursue them, but against whether your company's brand allows you to pursue them. Successful companies have a clear vision.
Rolf Jester is vice-president and distinguished analyst at Gartner, with a focus on IT services and marketing best practices for IT providers