Building your own version of a partner's product to improve margins or reduce dependency is a high-stakes, 'one-way door' decision. Once you commit, the relationship is damaged, and you must be prepared to go all the way, as it's often impossible to walk back.
Any market, given enough time, will mature into a predictable structure with a dominant market leader, specialized competitors, and niche players. This evolution is like gravity—unavoidable. Knowing your company's position within this structure is critical for choosing the right strategy.
Within the core 'market penetration' quadrant, changing pricing isn't just about raising prices. It's a form of product development. Creating new tiers, offering read-only options, or bundling features strategically can unlock growth without writing a single line of new code.
Don't assume selling in Europe is the same as North America; it constitutes a new market entry. Companies often make a 'ton of assumptions' about marketing data, buying cycles, language, and regulations, underestimating the difficulty and risk of the move.
The typical 5-year (60-month) investment horizon for private equity firms is too short to accommodate the uncertainty required for a successful 'diversification' strategy (new product, new market). This constraint forces PE-backed firms to focus on less speculative growth quadrants.
Unlike venture capital, private equity investment theses should not depend on building a new product for a new market. Entering a deal with this requirement is a significant red flag, as PE focuses on optimizing existing, proven models, not high-risk, venture-style exploration.
Before pursuing new markets or products, leadership must honestly assess if the core product is complete (solves the whole problem), strong (not buggy), and stable (predictable performance). Failing this simple test means there is still significant value to be captured in the core business.
Ironically, your happiest and most loyal customers pose a strategic risk. They will ask you to build things far outside your core competency. Saying yes out of a desire to please them can unintentionally pull your company into riskier growth quadrants without a deliberate strategy.
When entering a new market, the sales team will inevitably bring back deals contingent on a 'small' product change. This phrase is a major red flag for how companies get dragged from a clear strategy into the riskiest quadrant by last-mile sales requests.
Investors and board members should demand that management teams categorize their growth and revenue plans by the four Ansoff quadrants. This simple exercise forces honesty, reveals hidden risks, and clarifies whether the team is relying too heavily on speculative ventures versus strengthening the core business.