Growth Through Adjacent Markets
Adjacent markets are a great source of sales growth if you can spot them and if you have the right skills to go after them. Let’s look at how you do it.
First, let’s understand what we mean by an adjacent market. It’s often confused with the term ‘white space opportunity.’ By adjacent, I mean markets that are close in proximity to what you already do or where you do it. I’ll explain this more in a minute. White space opportunities, on the other hand, are far away from your core business. By definition, they’re riskier and more expensive to tackle than adjacent markets, at least in my experience.
Now here’s a tip. The most common misunderstanding about adjacent markets is that it’s all about exporting your existing products to new customers. Not true. The secret to adjacent markets is to export your skills and capabilities, not products and services. It’s taking your core competencies and creating new value with new customers. Let’s dig in a little deeper.
Consider a company like Berlitz, the language company. It has thousands of associates who can speak two or more languages. The company offers language training, translation services, and so on. So we ask ourselves, what skills do they have that could create a new source of value? For example, when someone learns a new language, they often travel to countries where that language is spoken. They learn about the destination, tourist areas, and the culture. Could these skills be leveraged to offer travel advisory services? For Berlitz, it might be an attractive adjacent market.
Here’s another example. Bic is a French company that makes a wide variety of products like pens and disposable razors, mostly made of plastic. So Bic has a core competency in all things plastic – how to make it, mold it, package it, and so on. But to be a good adjacent market, it has to be more than just things made out of plastic. In this case, Bic would want to create new plastic products that can be sold in its existing distribution channels. That makes the sales growth opportunity less risky and more accessible.
Take Nike for example. When it goes after a new sport like mountaineering, it starts by selling athletic footwear in that sport. Once it establishes itself with the new customers and new distributors, it expands into clothing and apparel for that sport and eventually into the equipment used in the sport. Very clever.
So the keys to adjacent markets are skills and accessibility. But you should consider the same factors that you would use to evaluate any new market. What’s the competition like, how big is the opportunity in terms of volume and profits, and are there legal or regulatory barriers you’ll need to tackle.
So look at your company’s skills and it’s existing channels. Find new ways to use those skills in your accessible channels and you’re on your way to a new sales growth opportunity.