Evaluating market opportunities and innovations

Note: This post is developing the train of thought of the On Software Product Strategy post.

Ansoff matrix is essential for strategic marketing planning where it can be applied to look at opportunities to grow revenue for a business through developing new products and services - so it is called often Product-Market Matrix [1]. The Innovation Ambition Matrix is actually based on the Ansoff matrix (see Figure 1).

Figure 1 Ansoff Matrix

It is used to evaluate opportunities for companies to increase their sales through showing alternative combinations for new markets against products and services offering four strategies as shown. The matrix explores the relationship between the product and the market by presenting four alternative growth strategies: market penetration (i.e. incrementally enhancing an existing product to increase its market share), product development (i.e. creating a new product for an existing market), market development (i.e. entering to a market with an existing product), and diversification (i.e. developing a new product for a new market).

Product Innovation with Innovation Ambition Matrix

In order to be successful, a product often mandates innovative ideas and services to satisfy customers’ need. These innovations must provide real benefits to the customers: at least one unique feature that differentiates the product from the competitors. This differentiating feature should be highly relevant for the user and so attractive for users that they switched to it [2].

It is important to differentiate the different innovation types as it requires various execution plans. A helpful way to classify innovations is the Innovation Ambition Matrix (IAM) Figure 2.

Figure 2. Innovation Ambition Matrix (IAM)

The IAM considers two dimensions - both the novelty of the product on the horizontal axis and the novelty of the market on the vertical axis. This approach distinguish three different innovation types:

  • Core innovation: optimizes existing products for established markets, it utilizes the skills and assets the company currently has and makes incremental changes to the current product.
  • Adjacent innovation: involves leveraging something the company does well — for example introducing an existing product to a new market or creating a new product for an existing market.
  • Disruptive innovation: typically solves a customer problem in a better, more convenient, or cheaper way than existing alternatives. It usually creates a new market by addressing non-consumption by attracting people who did not take advantage of similar products.


      [1] Igor Ansoff. Strategies for Diversification. In: Harvard Business Review (Apr. 1957).

      [2] Bansi Nagji and Geoff Tuff. Managing Your Innovation Portfolio. In: Harvard Business Review (Apr. 2012).