Strategic Expansion through Core Business Adjacencies Evaluation at Furger and Partner Inc.
Strategic expansion opportunities are explored through the evaluation of adjacencies to a core business, focusing on product, geographical, value chain, channel, client, and new business adjacencies. The criteria for evaluating adjacencies include factors such as proximity to core business, customer differentiation, region alignment, product innovation, and technology advancement.
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Adjacencies Evaluation of strategic options Furger and Partner Inc Strategy Development Hottingerstrasse 21 8032 Zurich Fon +41 44 256 80 70 Fax +41 44 256 80 79 Mail furger@furger-partner.ch www.strategy.app
Adjacency is defined as the distance to the core business The closer a target is to the core business, the better; due to the following factors Learning curve effects Reduced complexity Speed Strategic clarity Ability to drill down Adjacency logic requires a strong and clearly defined core business There are six primary adjacencies to expand a strong core business Product adjacencies Geographical Adjacencies Value Chain Adjacencies Channel Adjacencies Clients Adjacencies New Business Adjacencies Distant Adjacencies Middle Adjacencies Close Adjacencies Core Business 2 www.strategy.app
Core business as a basis for expansion opportunities Regions Channels Value Chain Core Business Competencies and Assets Customers, Products and Technologies Differentiation from the competition Customer Groups Technologies Products 3 www.strategy.app
Adjacencies are defined for the existing core business Outsourcing Local Backward integration New Competences New regions Forward integration International/Global New stages in the value chain Internet New Substitutes New distribution channels CORE Distribution New Business Units Direct New Business Models New customer segments Existing segment microsegmentation New Products Next generation Existing segments not penetrated yet Novelties Support Services New segments Complementary products 4 www.strategy.app
Criteria for the evaluation of adjacencies Rating scale for the distance to success Criteria Definition 0 1 2 3 Total new and unknown customers How different are the target customers compared to existing customers? Customer groups Same customers Similar customers New customers How close is the customer's need to the existing or known customer problems? Same customer problem Similar customer problem New customer problem Total new customer problem Customer problem How close is the target region to the current market regions? Close or similar region Total different / far away region Same regino Different regions Region How high is the degree of innovation of the new product compared to existing products? Product / Service same product Similar product New product Total new product How new is the technology in relation to known and proven technologies of the company? Similar technology Total new technology Same technology New technology Technology Similar distribution channel Total new and unknown channels Can existing channels be used or must new channels be created? Same distribution channel New distribution channel Distribution channel How close is the activity in the value chain to other offerings? Same part of the value chain Adjacent part of the value chain Distant part of the value chain At the other end of the value chain Value chain 5 www.strategy.app
Criteria for evaluating the distance to success Rating scale of valuation for distance to success Criteria Definition 0 1 2 3 Quantity and value of the target market today (value in , actual values in year ) to be discussed High market volume >1.000 Mio. Medium market volume 200 1000 Mio. Small, but growing market 20 -200 Mio. No existing market 0 Mio. Market volume Value of existing revenue in the target market value per year in real terms High revenue- high growth rate Medium revenue Small revenue No actual revenue Revenue Estimated time in years to reach first revenue in the target market Already revenue started Time until first revenue 1 year 3 years > 5 years Market is already occupied by competitors Existing competitors Competitors for similar products Competitors about to enter No competition visible Competition Substitution by higher customer benefit Substitution by other different application New product and new technology / not proven yet Substitution of existing products Are existing products / offerings being substituted by the new strategic option Substitution possible Financial resources / investment needed No investment Low investment Investment High investment Investments Know how needed / people / specialists Some know how to be build up Know how to be acquired All know how to be acquired People available Know how 6 www.strategy.app
Search for growth options(I/II) Customers Regions Channels Existing New - possible www.strategy.app
Search for growth options(II/II) Competences Products Value Chain Existing New - possible www.strategy.app
Assessment of the option : Distance to success Adjacency Criteria Description Value Criteria Description Value Customer group Market volume Customer problem Revenue Region Time until first revenue Product / service offering Competition Technology Substitution of existing products Distribution channel Investments Value Chain Total distance to success Total value of adjacency 9 www.strategy.app
Evaluation of the options according to two dimensions: high Growth through diversification New ideas Adjacency to core business Expansion of core business Quick Wins low high low Distance to success www.strategy.app
Bundling of options to strategic directions high Growth through diversification New ideas 2 1 Adjacency to core business 5 3 4 7 6 Expansion of core business Quick Wins low high low Distance to success www.strategy.app
Your contact Ignaz Furger Furger and Partner INC Strategy Development Hottingerstrasse 21 CH 8032 Zurich Fon +41 44 256 80 70 Fax +41 44 256 80 79 Mail furger@furger-partner.ch www.strategy.app
