Understanding the real boundary of your “business area” is the first step to expanding it. This guide turns big frameworks into practical steps: define your market honestly, diagnose what truly constrains growth, and choose proven plays to unlock new potential.
- Define your market with TAM/SAM/SOM and validate bottom-up; most overestimation errors come from poor assumptions and confirmation bias.
- Your core competencies and strategic trade-offs set today’s limits; growth comes from leveraging those strengths into adjacencies or creating new demand.
- Expand potential via Ansoff Matrix plays, adjacency growth with a clear right-to-win, Jobs to Be Done (JTBD) discovery, and Blue Ocean value innovation.
1) Start with clear definitions: what “limit” really means
A practical way to express your market boundary is TAM → SAM → SOM:
- TAM (Total Addressable Market): total revenue opportunity if you captured 100%.
- SAM (Serviceable Addressable Market): the slice your products/channels can actually serve.
- SOM (Serviceable Obtainable Market): the share you can realistically win near-term.
When sizing new or emerging categories, remember that executives routinely misjudge market size; common traps include top-down wishful thinking and ignoring adoption barriers.
2) Recognize the built-in boundaries of your business
Two classic strategy ideas explain why your area has limits:
- Core competencies: the distinctive, hard-to-imitate capabilities that power growth across offerings. They’re the roots that determine where the firm can credibly expand.
- Strategy is trade-offs and fit: advantage comes from a unique position and a coherent system of activities—so you can’t chase every adjacent idea without breaking the fit.
In plain English: your boundary is not only the market you target but also the capabilities you can leverage without diluting what makes you win.
3) Diagnose the ceiling: a quick audit
Ask these six questions before you “expand the area”:
- Is your SOM stuck below plan because of a system bottleneck? Use the Theory of Constraints to find the constraint (capacity, channel, cash conversion, onboarding, etc.) and fix that first.
- Where are you on the adoption curve? If you haven’t “crossed the chasm,” your limit is not the TAM—it’s the first mainstream beachhead.
- Are you near an S-curve plateau? Mature offerings often need a new S-curve (improvement, new segment, or new model) to restart growth.
- Which customer “jobs” are you really solving? JTBD research often reveals bigger (or different) markets than your current category.
- Do your economics allow scope? Some firms unlock capacity by serving adjacent offerings with shared assets—economies of scope—others do not.
- Are you mis-sized? Re-estimate TAM/SAM/SOM bottom-up (accounts × price × frequency) and pressure-test drivers.
4) Five proven plays to expand the potential of your area
A) Execute the Ansoff Matrix (pick the right risk/return)
- Market Penetration (same product, same market): pricing/packaging, channel mix.
- Product Development (new product, same market): add complements, bundles.
- Market Development (same product, new market/geo): new segments/geographies.
- Diversification (new product + new market): only with a real right-to-win.
B) Grow through adjacencies where you have a “right to win”
Winning companies expand into closely related spaces that exploit existing capabilities, channels, or IP—outgrowing peers that chase unrelated bets.
C) Discover bigger demand with Jobs to Be Done
Interview for functional, social, and emotional “jobs,” then design offerings around the job rather than the product category—this often redraws your market boundary.
D) Create a Blue Ocean (new demand, new rules)
Pursue value innovation—simultaneous differentiation and low cost—to open uncontested space instead of fighting within current industry boundaries.
E) Leverage scope (when it truly lowers cost)
If assets/brand/salesforce are shareable, expanding variety can reduce average costs and improve margins; if not, scope just adds complexity.
5) How to size the upside without fooling yourself
Use three lenses and triangulate:
- Top-down: start with credible industry totals, then slice by relevant filters—but treat this as a ceiling, not a forecast.
- Bottom-up: count target accounts × realistic penetration × ARPA/ARPU; this is your operating plan.
- Value-theory: estimate the willingness to pay for the job done (especially useful for new categories). Common errors include applying mature-market shares to immature markets and ignoring adoption frictions.
For terminology consistency and investor communication, stick to standard TAM/SAM/SOM definitions.
6) From idea to traction: sequencing matters
If you’re still early, cross the chasm first—win a narrow beachhead, create references, then scale. Later, when growth slows, jump to a new S-curve (new segment, pricing model, or product line) rather than over-pushing a plateaued curve.
7) A simple worksheet you can copy
Step 1 — Define the area
List the customer job(s), segment(s), and channel(s) you currently serve; write one-line proofs of your right-to-win (competence, cost, relationships).
Step 2 — Size it honestly
Fill in TAM/SAM/SOM with bottom-up math and key assumptions. Add a “confidence” column to flag weak inputs.
Step 3 — Find the constraint
Name the single biggest limit to growth this quarter (supply, CAC payback, sales capacity, onboarding throughput) and what you’ll change.
Step 4 — Choose 1–2 expansion plays
Map ideas to Ansoff, adjacency, JTBD, or Blue Ocean and write the hypothesis you’ll test next.
Step 5 — Sequence for adoption
Define the beachhead segment and reference plan to move from early adopters to the early majority.
FAQs
What’s the fastest way to increase my obtainable market (SOM)?
Usually by removing the system bottleneck (e.g., sales capacity, onboarding throughput) and improving conversion in the segments you already serve before chasing new ones.
Isn’t “Blue Ocean” just marketing?
No. It’s a structured approach—value innovation aligns utility, price, and cost to create new demand while lowering costs, so you’re not trapped by current industry boundaries.
When should I diversify versus double down on adjacencies?
Diversification carries the highest risk. Evidence suggests CEOs outperform when adjacencies build on existing advantages and a clear right-to-win; unrelated bets underperform.
Why do teams keep overestimating TAM?
Because top-down slides are easy and seductive. Independent research highlights cognitive bias and wrong comparables as recurring culprits—triangulate with bottom-up and value-theory.
