The following question was asked during our most recent webinar, “Discovering Markets.”
Q: How do you choose which quadrant of the opportunity matrix to focus on?
A: When beginning to plan for external growth, you may be blown away by the sheer number of possibilities and options. As exciting as they may appear, you’ll have to pare them down to create an actionable plan for business growth.
Choosing where to focus your external growth efforts begins internally. First, look at where your business is today and ask yourself: Where do you want it to be? Where do you see opportunity? Where do you excel and where do you struggle? Use data and criteria to evaluate how you are positioned and your capabilities.
For example, if you find your business is not reaching a high-growth market, consider acquiring a company in that market. If you find that a lack of technology prevents you from creating a product your customers want, you’ll likely be interested in acquiring a company with that technological capability. Two recent deals illustrate my point: Japan’s Suntory acquired Jim Beam for access to the U.S. market and GE acquired API Healthcare for its software to improve staffing efficiencies in hospitals.
Also consider your risk profile. Each quadrant inherently carries different levels of risk, listed here from least risky to most risky: (1) Consolidation, (2) Distribution, (3) Breadth, and (4) Diversification. Businesses can succeed in any of the quadrants; it’s all about your own level of comfort.
After your internal analysis, to further flesh out your ideas, your acquisition team should envision what your company would look like if you were to pursue each of the four paths. Would you still be aligned with your passion and your business plan? This will help you make an educated decision about your growth and create a strategic and executable plan for the future.