How to Make Your Own Luck

How to make your own luck“Luck is not something you can mention in the presence of self-made men.” (E.B. White)

TODAY, over coffee with a friend at an alfresco cafe in Sydney, our conversation turned, as if by chance, to consider the nature of luck.

As an Australian, I have always considered myself lucky. After all, if you grow up in a country with good food, great beaches, and free health care and education, then dwelling on small misfortunes would seem to suggest a slight lack of perspective (although some people will always find a way).

And while some people do get a better start in life than others, we discussed instead a slightly different and more interesting breed of luck – the kind you can make for yourself.

Some people seem to get all the lucky breaks and to be always in the right place at the right time. Why does this happen? And what do the lucky people do differently from the rest of us?

It occurred to us, while sipping our decaf skim soy lattes, that the formula for creating good luck is, like most deep wisdom, fairly simple to explain but hard to implement. And it appears to consist of just 3 elements: (i) setting great expectations, (ii) preparing yourself and having persistence, and (iii) embracing opportunities as they arise.

Please find below, dear reader, a list of quotes that may shine additional light on what is required from you to create good luck in your work and your life.

1. Setting Great Expectations 

“You are what you settle for.”
~ Janis Joplin

“Million-to-one chances…crop up nine times out of ten.”
~ Terry Pratchett

2(a) Preparing Yourself

“Luck is what happens when preparation meets opportunity.”
~ Seneca

“Opportunities are everywhere, you just have to be ready for them.”
Peter Baculak

2(b) Having Persistence

“I’m a great believer in luck, and I find the harder I work the more I have of it.”
~ Thomas Jefferson

“Luck is a dividend of sweat. The more you sweat, the luckier you get.”
~ Ray Kroc

“Diligence is the mother of good luck.”
~ Benjamin Franklin

“The only thing that overcomes hard luck is hard work.”
~ Harry Golden

3. Embracing Opportunity

“Luck affects everything, let your hook always be cast; In the stream where you least expect it, there will be a fish.” ~ Ovid

“Learn to recognize good luck when it’s waving at you, hoping to get your attention.”
~ Sally Koslow

“Opportunity is missed by most people because it is dressed in overalls and looks like work.”
~ Thomas Edison

“I was seldom able to see an opportunity until it had ceased to be one.”
~ Mark Twain

How to Make Stress Your Friend

Viewing stress as helpful can foster courage, and connecting with others under stress can aid resilience

KELLY McGONIGAL explains that merely believing that “stress is harmful” can increase your chances of premature death.

The good news is that by changing how you think about stress you can change your body’s stress response and improve your physical resilience.

When you choose to see stress in a positive way, as a sign that your body is energised and rising to meet the challenge, it can help you remain more relaxed and work better under stress. At the same time, it can change your biological response to look like joy and courage.

One of the interesting things about the stress response is that it can make you more social. Oxytocin, sometimes referred to as the cuddle hormone, is produced under conditions of stress and can prompt you to strengthen close relationships and support the people you care about.

Perhaps counter-intuitively, caring for other people can provide you with stress resilience. When you ask for help or give help to others under stress, the body produces more Oxytocin. And since the hormone is a natural anti-inflammatory, this can help your blood vessels stay relaxed and protect your heart and cardiovascular system from damage. According to McGonigal, people who spend time caring for others show no increase in premature death when placed under conditions of stress.

In the end, pursuing meaning in your life and in your career by finding ways to help others is likely to be better for your heath than merely trying to minimise stress and avoid discomfort.

Mistaking the Wood for the Trees

The business model is how you get paid, but the business is why you get paid

AT first glance, business and charity appear quite different. Many business professors and executives will tell you that business is all about increasing sales, reducing costs, and creating future growth. Charity, on the other hand, is about voluntarily giving help to the needy.

Taking a broader perspective, however, business and charity actually appear remarkably similar. The underlying raison d’être for both types of organisation is to identify problems in the community and provide solutions. The difference is often just the business model used to sustain and scale the solution.

Business leaders run into trouble when they confuse the business model for the business. The business model is how you get paid, but the business is why you get paid. A business model is the system used to generate revenue, donations or sponsorship, whereas the business is the organised and sustained effort to solve people’s problems.

This confusion has led many business leaders to miss once-in-a-life-time opportunities to solve existing problems in new ways. Take the book industry for example. Although Borders and the other big book retailers could have built online book-stores in the early 2000s, they didn’t do it. It wasn’t part of their business model. They got paid for selling books in bricks-and-mortar retail stores, and not via the internet. So, why should they bother learning a new technology? Well, they were in the business of giving people access to books, knowledge, learning, wisdom and erudition. And they missed a key opportunity to help people in a new way.

Mistaking the wood for the trees can be a costly (billion dollar) mistake. In 2001, Borders Group outsourced its online store to Amazon because its own fledgling online efforts were seen as a distraction from its core bricks-and-mortar retail business. The executives had mistakenly believed that the bricks-and-mortar stores were “the business”, when in actual fact they were just “the business model”.

Having passed up the chance to help people in a new way, Borders Group was ultimately denied the right to help people in any way whatsoever. The company filed for bankruptcy in 2011 – the same year in which Amazon reported 41% year-on-year growth and $48 billion in revenues.

Why business can be good at solving social problems

By addressing social issues with sustainable business models, business leaders have the potential to provide scalable solutions

MICHAEL PORTER makes an astute observation – the world is full of social problems.

From environmental degradation and disease to unemployment and inequality, solving social problems has traditionally been the domain of NGOs, the government and philanthropists.

Meanwhile, business school professors and corporate CEO’s like Jack Welch spread the gospel that the primary goal of business is to “maximise shareholder value”.

If the relentless drive for profits happened to create social problems like pollution or obesity, then that was certainly regrettable. And the government should probably do something about that.

Traditional business thinking drew a very clear line between social problems and the world of business.

Fortunately, a new brand of business thinking has now evolved, and Professor Porter is flying the flag to raise awareness for a game changing business philosophy he calls “shared value”.

The basic idea is fairly simple; by using sustainable business models to address social issues, businesses can create social value and economic value at the same time.

As we identified back in March when we looked at Sustainable Social Enterprise, one of the core problems with traditional charities and government social programs is that the solutions don’t scale. Beholden to government budgets, political interests, or the whim of philanthropists, the very programs designed to solve our most challenging social problems remain financially constrained. Without a sustainable business engine, their wings are clipped, and many promising initiatives never even get off the ground.

The business sector has a role to play in solving social problems since they understand the power of profit.

If you provide good value for a fair price, and recoup your costs in the process, then you buy yourself the chance to do it again, and again. The virtuous cycle of value creation flows from having a sustainable business model and the resulting profits can enable a business to scale the solution.

As fate would have it, solving social problems can also make good business sense:

  • healthier employees are more productive employees,
  • a safer workplace means less downtime and fewer lawsuits,
  • reducing pollution can help a business become more efficient and productive, and
  • helping suppliers improve their capabilities can help an upstream firm to streamline or customise its own production line.

The world is full of social problems, and the opportunities to have a positive social impact are bigger than ever.

The only difference is that, this time, business can be part of the solution.

6 Ways to Overcome Loss Aversion

Loss aversion can lead people to favour the status quo, and so clever marketing is sometimes needed to convince people to buy new products

Trial Offer

LOSS AVERSION can lead people to favour the status quo.

How so?

Well, when a consumer considers replacing a good, the presence of loss aversion can lead her to experience more pain in giving up the existing good than she feels joy in acquiring a comparable new one. And so, she does nothing.

While this preference for stability over change can help consumers conserve their money (and we believe that living within ones means is generally a good thing, despite what Paul Krugman will tell you), this penchant for the status quo does not help marketers, entrepreneurs and business leaders persuade consumers to try new products and part with their hard earned cash.

This is not a new problem, but it remains an issue nonetheless.

Below we highlight 6 methods that you can use to overcome loss aversion and encourage consumers to buy new products.

1. Trial Offers & Money Back Guarantees

Trial offers and money-back guarantees are two of the oldest tricks in the marketing playbook. But why do they work?

Due to the role played by loss aversion, when a customer loses a good they generally sacrifice more enjoyment than they gained from acquiring it in the first place.

Trial offers are effective because although a customer may not have been willing to pay the market price to try a product, they may be willing to pay the market price to avoid losing the product when the trial period expires.

Similarly, money back guarantees are effective since, once a good is in a customer’s possession, the payment that she will demand in exchange for giving up the good will tend to be higher than what she originally paid for it.

2. Just Try It On

If you go to buy a suit, the salesperson will probably invite you to try it on.

By doing so, you will start to form an attachment to the product and, due to the role played by loss aversion, the price at which you will be willing to walk away from the product will be slightly higher than before.

3. Trade Ins

People buy goods to enjoy them.

But once the new goods are in hand, people can be reluctant to replace them.

The presence of loss aversion means that people place more weight on losses than commensurate gains, and so can often require a higher price to part with a good than they would be willing to pay to acquire a comparable new one.

While people may have a preference for stability over change, this inclination has been shown to break down where a new good is a close substitute for the old one. And so, if marketers can show that a new good offers all of the benefits of the old good, then people will be much more willing to upgrade since they can part with the old good without losing any benefits.

4. Deferred Payment Plans

By allowing customers to delay payment until after consumption has commenced, you can change the consumption decision from “do I need this?” to “can I do without it?”

5. Framing the Purchase Options

Marketers can influence a purchase decision, even without concealing information, by merely framing the options in a particular way.

For example, would you rather get a 2% discount, or avoid a 2% surcharge?

Lobbyists for the credit card industry worked hard to frame the price difference between cash and credit purchases as a “cash discount” rather than a “credit card surcharge”. The term “cash discount” frames the price difference as a gain by implicitly defining the higher price as normal. And the term “credit card surcharge” frames the price difference as a loss by implicitly defining the lower price as normal.

Since losses have more emotional impact than comparable gains, you are much more likely to forego a 2% discount than to accept a 2% surcharge. And so, by the clever use of framing, consumers have been encouraged to spend on credit.

6. Framing the Expense

People often have a budget and will distinguish between within-budget spending, which they do not think of as a loss, and unbudgeted spending, which provokes loss aversion.

Reader Sally McKenzie made a good point in her comment on the previous post saying, “I think people have intentions for their money. I’m currently travelling on a shoe string budget in Eastern Europe, and it really hurts me to spend money if it makes me exceed my daily budget. Must save precious resources for Croatia!”

Marketers can try to avoid the loss aversion connected with unbudgeted spending by framing a purchase as being within the customer’s existing budget.

For example, marketers might target cost-conscious consumers by describing a product as a “sound investment” which “holds its value well”, and his might be an effective pitch for durable goods like cars or furniture.

Another way to frame spending would be to provide customers with a trial offer. The trial period can give a customer a chance to think about how she might fit the new product into her existing budget. And in this way, the trial offer can help to transform the new purchase into a budgeted expense.

How Much Loss Aversion Will A Person Feel?

“Everything is relative in this world, where change alone endures” (Leon Trotsky)

Loss Aversion 2

IF you were offered the chance to win or lose $100 on the basis of a coin flip, would you take the bet?

If you are like most people, you would probably decline the wager.

Even though the gamble offers an even chance of winning, the stakes are unattractive since the suffering from a loss would be felt much more deeply than the joy from winning.

Economists refer to this as loss aversion, and the emotional impact from a loss is thought to be around twice that of a comparable gain.

While it is convenient to talk about losses as being “twice as powerful”, research suggests that loss aversion will tend to vary from person to person, in different situations, and for the same person at different points in time.

Below we highlight 5 factors that have been shown to influence how much loss aversion a person will feel.

1. Everything is relative

Leon Trotsky is quoted as saying that “everything is relative in this world, where change alone endures”, and Trotsky may well have been talking about loss aversion.

Due to the way that people mentally account for things, gains and losses tend to be evaluated in relative terms. For example, if you lose $100 from a stock portfolio worth $10,000 then you are likely to suffer much less than if the entire portfolio was worth only $100 and you lost the lot.

2. Intention

Nat Novemsky and Danny Kahneman explain that our intentions for a good define whether it is “an object of exchange or … an object of consumption, and therefore … determine whether giving [it] up … is evaluated as a loss or a foregone gain.”

What exactly does this mean?

Well, imagine you have an iPhone. If you are carrying it around with you and someone steals it, then you have suffered a loss. Alternatively, if your intention is to sell the iPhone (because you want to get a Samsung Galaxy) and a good friend offers you $600 for it, but you end up giving it to her for free, then that’s a foregone gain. In each case the result is the same (no iPhone and no money), but the first situation, the one where you suffered the loss, will be more distressing.

3. Duration of Ownership

A person will tend to view a product as more valuable if it has been owned for a longer period of time. For example, if you have a well-worn pair of slippers that you have grown to love, then you will probably be reluctant to throw them away (probably even if they are riddled with holes).

4. Substitutability

A person will find it easier to give up a product if it is exchanged for something that affords similar benefits. For example, you will be much more likely to sell your old car if it is exchanged as a trade-in for a new car which has comparable features.

5. Age

It will probably come as no surprise that older people are more loss averse.

It is easy to imagine a situation where a budding 20-something might be prepared to risk her entire life savings on an entrepreneurial venture, whereas a middle-aged woman might be less enamored by the idea.

Loss Aversion

Loss aversion is a widespread behavioural trait which causes people to experience the suffering from a loss much more deeply than the joy from a commensurate gain

Loss Aversion

Background

Everyone knows that people don’t like to lose things.

People are reluctant to give their old clothes to Vinnies, to leave dysfunctional relationships, or to throw away an old pair of slippers.

While it is common sense that people are averse to loss, the principle of “loss aversion” is a relatively new development in the history of economic thought. It was first introduced by Danny Kahneman and the late Amos Tversky in 1979 to help them explain how people make decisions under conditions of risk.

What is Loss Aversion?

Loss aversion is a widespread behavioural trait which causes people to experience the suffering from a loss much more deeply than the joy from a commensurate gain.

The emotional impact from a loss is thought to be around twice that of a comparable gain. Or, as Dan Ariely puts it, “finding $100 feels pretty good, whereas losing $100 is absolutely miserable.”

While prevalent in humans, loss aversion is by no means unique to homo sapiens. In a study conducted around 2005, capuchin monkeys were shown to exhibit similar behaviour.

Under experimental conditions, the capuchins were offered two alternative gambles: (i) one grape with a coin-flip chance of winning a second grape, or (ii) two grapes with a coin-flip chance of losing the second grape.

As you will appreciate, the two gambles offer the same sweetener (in expectation). The only difference was that the first gamble was framed as a potential win, whereas the second was framed as a potential loss.

Which alternative did the monkeys prefer? Surprisingly, they favoured the first one, the gamble framed as a potential win.

This is not what mainstream economics would predict. But, as it turns out, the capuchin monkeys share a certain behavioural trait with most humans – loss aversion.

Tim Minchin’s Nine Life Lessons

“It’s an incredibly exciting thing, this one meaningless life of yours” (Tim Minchin)

“TIM Minchin is a genius, pure and simple. He is to musical comedy what Charles Darwin was to evolution” (Tim Arthur, CEO of TimeOut Magazine).

We tend to agree.

For those of you unfamiliar with Tim’s work, you can check out some of his amusingly irreverent musical comedy here.

But how does this help you? How is this relevant to consulting, the universe, or anything?

Well, as it happens, Tim was recently asked back to give a graduation address at his former Uni, the University of Western Australia. His speech was not only hilarious, as you would expect from a professional comedian, but also incredibly heartfelt and deeply insightful.

In the speech, Tim provides 9 valuable lessons for enjoying a good and happy life.

Watch the speech above, and read our dot-point summary below.

Tim’s Nine Life Lessons

  1. You don’t need to have a dream – If you have a big dream then by all means go for it. But, even more so, you should pursue your short term goals with passion and dedication. Your next worthy pursuit will more than likely be a shiny thing that appears suddenly and unexpectedly on the periphery of your vision. And if you are too focused on your long term dreams, you could miss it.
  2. Don’t seek happiness – We were edified to learn from Tim that, “happiness is like an orgasm, if you think about it too much it goes away.” Tim encourages us to keep busy and aim to make others happy, and you might just get some happiness in return.
  3. It’s all luck – Understanding that you can’t truly take credit for your successes, nor truly blame others for their failures will humble you and make you more compassionate.
  4. Exercise – Take care of your body because you’re going to need it. Most people reading this will live to nearly a hundred, and even the poorest among you are far wealthier than most humans throughout history could ever have dreamed possible. The long luxurious life ahead is going to make you depressed, but don’t despair, there is an inverse correlation between depression and exercise.
  5. Challenge your beliefs – Tim helpfully reminds us that “opinions are like arseholes in that everyone has one … except that opinions differ significantly from arseholes in that yours should be constantly and thoroughly examined.” Think critically, be hard on your beliefs, and take them out onto the verandah and hit them with a cricket bat every once and a while.
  6. Be a teacher – Teachers are the most important people in the world. Don’t take your education for granted, rejoice in what you have learnt, and share your ideas with others.
  7. Define yourself by what you love – We have a tendency to define ourselves by our opposition to stuff (think Tony Abbott during his years as opposition leader). Instead, we should try to express our passion for the things we love.
  8. Respect people with less power than you
  9. Don’t be in such a hurry – You don’t need to know what you’re going to do with the rest of your life. Most people who were sure of their career path at the age of 20, are now having a mid-life crisis. It’s an incredibly exciting thing, this one life of ours, and we might just want to take it one step at a time.

Product/Market Expansion Matrix

A framework to help executives, senior managers and marketers devise strategies for future growth

Ansoff Matrix

1. Background

THE Ansoff Matrix (referred to by some commentators as the Product/Market Expansion Grid) was developed by a Russian-American mathematician named Igor Ansoff, and first explained in his 1957 Harvard Business Review article entitled Strategies for Diversification.

2. Benefits of the Ansoff Matrix

The Ansoff Matrix is particularly useful for strategic planning because it provides a framework to help executives, senior managers and marketers devise strategies for future growth.

By aiding clear thinking about growth strategy, the Ansoff Matrix can help an organisation avoid key risks such as:

  1. Overlooking available growth strategies;
  2. Misunderstanding the implications of pursuing a particular strategy; or
  3. Selecting an inappropriate strategy given the firm’s diversification objectives.

3. The Ansoff Matrix Explained

The Ansoff Matrix can help a firm devise a product-market growth strategy by focusing on four growth alternatives: Market Penetration, Market Development, Product Development, and Diversification.

Ansoff Matrix

What is a Product-Market Growth Strategy?

A product-market strategy is a description of a firm’s products and target markets. While this may sound straightforward, it can be difficult to clearly delineate a target market since it can be defined very broadly (e.g. the transport market) or very narrowly (e.g. domestic air transport in America for cost-conscious business travellers).

In general, a market should not be defined too broadly (or too narrowly) since a key purpose of market definition is to allow a firm to develop strategy and make decisions.

In his 1957 paper, Ansoff defined a product-market strategy as “a joint statement of a product line and the corresponding set of missions which the products are designed to fulfil.” For example, one of Apple’s product missions might be to provide consumers with easy-to-use digital technology, and another mission might be to provide fashion accessories for Yuppies and young people.

The Four Growth Alternatives

The four alternative growth strategies are:

  1. Market Penetration: a strategy to increase sales without departing from the original product-market strategy. This involves increasing sales to existing customers and finding new customers for existing products.
  2. Market Development: a strategy to sell existing products to new markets (normally with some modifications). Ansoff described this as a strategy “to adapt [the] present product line … to new missions.” For example, Boeing might adapt an existing model of passenger aircraft and sell it for cargo transportation.
  3. Product Development: a strategy to sell new products, with new or altered features, to existing markets. Ansoff described this as a strategy to develop products with “new and different characteristics such as will improve the performance of the [existing] mission.” For example, Boeing might develop a new aircraft design which offers improved fuel economy.
  4. Diversification: a strategy to develop new products for new markets, which can either be related to the current business (e.g. vertical integration or horizontal diversification) or unrelated (e.g. lateral diversification).

Each of the above strategies represents a different path that a firm can take to pursue growth. However, in practice, a firm will often implement more than one strategy at the same time. As Ansoff notes, “a simultaneous pursuit of market penetration, market development, and product development is usually a sign of a progressive, well-run business and may be essential to survival in the face of economic competition.”

4. Selecting a Strategy

Selecting a growth strategy is a three-step process. Firstly, set out all of the available strategies. Secondly, apply qualitative criteria to short list the most favourable few alternatives. And finally, apply a return on investment hurdle to narrow the options still further.

Consider the discussion below for a summary of the issues and various situations in which it may make sense for a firm to select a particular growth strategy.

4.1 Selecting Market Penetration

Market Penetration carries the least implementation risk since a firm is focusing on its existing products and existing markets, and so should be able to leverage its existing resources and capabilities.

Pursuing this strategy is likely to make sense if the firm has a strong competitive advantage, or if the overall size of the market is growing or can be induced to grow.

4.2 Selecting Market Development

Market Development carries more implementation risk than Market Penetration because a firm is expanding into new markets.

Market Development

Companies that have successfully pursued this strategy include Coca-Cola and McDonalds, and it may make sense where:

  • the firm’s core competencies relate to its existing products and it has a strong marketing team;
  • the firm can identify opportunities for market development including chances to reposition the brand, exploit new uses for the product, or expand into new geographical regions; and
  • the firm’s resources are organised to produce particular products and changing the production technology would be costly.

4.3 Selecting Product Development

Product Development carries more implementation risk than Market Penetration because the firm is developing new products.

Companies that have successfully pursued this strategy include 3M, P&G and Unilever, and it may make sense where:

  • the firm understands the needs of its customers, and identifies an opportunity to sell new products to satisfy changing needs;
  • the firm operates in a competitive market where continuous product innovation is necessary to prevent product obsolescence or commoditisation;
  • the firm has large market share and a strong brand;
  • the firm’s products benefit from network effects, and new products can gain a significant edge by being first to market;
  • the firm operates in a market with strong growth potential;
  • the firm identifies opportunities to commercialise new technology; and
  • the firm has a strong R&D team.

4.4 Selecting Diversification

Diversification carries the most implementation risk since a firm is simultaneously developing new products and entering new markets, and may be operating entirely outside its circle of competence.

Diversification can enable a firm to achieve three main objectives: growth, stability, and flexibility. And the specific strategies that a firm employs will differ depending on which of these goals the firm is pursuing.

There are three primary kinds of diversification that a firm might undertake:

  1. Vertical Integration: the firm expands its business to different points in the supply chain;
  2. Horizontal Diversification: the firm adds new products that may be unrelated to existing products but are likely to appeal to existing customers. For example, Amazon sells clothes, jewellery and various other products through its online bookstore. Since the new products can be sold through existing distribution channels, Amazon benefits from revenue and cost synergies; and
  3. Lateral Diversification: the firm adds new products that are unrelated to existing products and are likely to appeal to completely different customers. While lateral diversification has little relationship with the firm’s current business, the firm might adopt this strategy in order to:
    • improve profitability by entering a lucrative industry;
    • develop resources and capabilities in a potential new “growth industry”;
    • poach top management or key talent;
    • compensate for technological obsolescence;
    • expand the firm’s revenue base so as to improve its perception in the capital markets and make it easier to borrow money;
    • increase strategic flexibility in an uncertain business environment; or
    • reduce risk by spreading the firm’s activities across multiple products and markets, and thereby decrease its vulnerability to negative Black Swans and unfavourable events like economic downturns, increased competitive rivalry, improved supplier or buyer bargaining power, better-quality substitutes, or reduced barriers to entry.

5. Implementing a Strategy

Consider the suggestions below on how to implement each growth strategy.

5.1 Implementing Market Penetration

Market Penetration involves increasing sales of existing products to existing markets, and could be pursued in the following ways:

  • Increasing advertising to promote the product or reposition the brand;
  • Offering special promotions (e.g. 2 for 1, or Buy One Get One Free);
  • Introducing customer loyalty schemes;
  • Improving the quality or size of the sales force;
  • Modifying the products or product packaging in order to broaden their appeal;
  • Improving the distribution channels in order to reach more customers within existing markets;
  • Targeting a market niche in order to grow sales and build overall market share (this approach makes sense if the firm is small compared to its competitors);
  • Acquiring a competitor (this approach makes sense in mature markets where the size of the overall market is not growing);
  • Changing product pricing; if demand is relatively inelastic, then it might be possible to raise prices without a big drop in sales. Alternatively, prices can be lowered to increase the quantity sold; and
  • Improving operational efficiency so that increased sales can be achieved without a proportional increase in costs (this could be attained through economies of scale and product rationalisation).

5.2 Implementing Market Development

Market Development involves selling existing products to new markets, or new market segments, and could be pursued in the following ways:

  • Marketing products in new locations in order to expand regionally, nationally or internationally;
  • Advertising through different media in order to reach different customers;
  • Utilising new distribution channels to reach new market segments, for example building an online store; and
  • Modifying the pricing policy, products or product packaging in order to appeal to different customer demographics.

5.3 Implementing Product Development 

Product Development involves selling new products to existing markets, and could be pursued in the following ways:

  • Developing new products through R&D;
  • Acquiring a competitor;
  • Forming a joint venture or strategic alliance with a complementary firm;
  • Licensing new technologies;
  • Distributing products manufactured by other firms;
  • Extending an existing product by producing different versions; for example, Apple has recently released the iPhone 5C and 5S;
  • Packaging existing products in new ways; for example, Apple has recently re-released the iPhone 5 in a range of colourful cases and called it the iPhone 5C; and
  • Finding new products that can be sold to existing customers; for example, an online bookstore might develop an e-reader (let’s called it the Kindle) and add a long list of unrelated products to the online bookstore. After all, if customers are willing to buy books on the Internet then they are probably willing to buy other things as well.

5.4 Implementing Diversification

Diversification involves selling new products to new markets, and can be pursued by simultaneously adopting the tactics suggested above for Market Development and Product Development.

[For more information on consulting concepts and frameworks, please download “The Little Blue Consulting Handbook“.]