Home Business Strategy How to Use the Ansoff Matrix to Scale a Digital Business

Updated: Dec 16,2025 Published: Dec 17,2020

11 min read

How to Use the Ansoff Matrix to Scale a Digital Business

Scaling a business means making choices, and those choices can feel overwhelming. Should you push harder in your current market? Expand to new customers? Build a new product? Each path carries different risks, and without a clear framework, it’s easy to waste resources chasing the wrong opportunity. The Ansoff Matrix solves this by mapping four distinct growth strategies based on two simple variables: products and markets.

In this article, I’ll walk you through each quadrant of the Ansoff Matrix and show you how to apply it to a digital business. Although this tool is nearly 70 years old, it remains one of the most practical frameworks for growth planning. Getting familiar with it doesn’t require any advanced skills. All you’re going to need is an open mind and a notebook. I hope that sounds promising enough to make you keep reading.

Key Points

The Ansoff Matrix is a 2×2 grid mapping four growth strategies based on products (existing vs. new) and markets (existing vs. new).
Market Penetration carries the lowest risk, while Diversification carries the highest.
The framework was introduced by Igor Ansoff in 1957 and remains relevant for digital and traditional businesses alike.
Most successful companies use multiple strategies simultaneously rather than betting on just one.
Risk increases whenever you change a variable: new market, new product, or both.

What Is the Ansoff Matrix?

The Ansoff Matrix is a strategic planning tool that helps you choose how to grow your business. Igor Ansoff, a Russian-American mathematician and business strategist, introduced it in the Harvard Business Review back in 1957.

The Ansoff Matrix is a 2×2 grid, sometimes called the Product/Market Expansion Grid. Each square represents a different growth strategy. The basic assumption is simple: to grow, you need to change your product, your target market, or both. The more variables you change, the higher the risk. Entering a new market with your existing product is riskier than selling more to current customers. Launching a new product into a new market? That’s the riskiest move of all.

Take a look at the picture below. This is the classic Ansoff Matrix.

Ansoff matrix

Market Penetration: Old Product, Old Market

Market Penetration is your safest bet, with the lowest risk among all four strategies. The goal of this approach is to increase the market share of your current product. It’s easy to figure out that this is a safe game. Depending on your product, though, there might not be much to gain.

Still, if you decide this is the way to go, what can you do?

There are three main options:

invest in marketing
attract customers with new pricing
buy your competition.

Those options seem very limited. However, the word “marketing” alone creates many possibilities. When used thoughtfully, this strategy is a good place to start. After all, if you plan on expansion, you need to build a solid base first. It’s only pragmatic.

Market Development: Old Product, New Market

Market Development is about finding new customers for your existing product, with moderately higher risk than Market Penetration. Say you’ve already dominated your primary market. You are happy with your product, and you don’t feel like developing a new one. Market Development is the right strategy for you. The risk here is slightly more significant than with Market Penetration, but the stakes are also higher. Putting it in simple words, you are going to look for another market for your existing product. How do you do it?

Here is the list of your options:

go outside of your city or country
target a different demographic group
add a new sales channel (start your online store or open one in the real world).

Market Development is clearly a more demanding growth option. It requires a lot of marketing effort, and at some point, it may also require slight changes in your product. But the growth potential is also significant. This is especially true when expanding internationally.

Product Development: New Product, Old Market

Product Development lets you leverage your existing customer relationships while offering something new. There might be many reasons why market expansion strategies aren’t for you. Whatever they are, here’s another approach: developing a new product. It’s called, what a surprise, Product Development. It entails introducing a new product into the market you already know. According to the Ansoff Matrix, the risk of such an endeavor is similar to that of Market Development.

The most obvious way to do it is to go through your personas and other data about your existing customer base and look for unmet needs you could address.

If you need different ideas, here are a few:

buy rights to someone else’s product
join forces with another entrepreneur
repackage your existing product.

If you want to scale up your company, developing a new product is something you’ll need to do sooner or later. It is up to you to decide if it’s the right time to do it.

Diversification: New Product, New Market

Diversification is the riskiest growth strategy. It means introducing a completely new product into a completely new market. Nevertheless, I know you’ve done it at least once. Did you enjoy it? Are you ready to do it again? If the answer is “yes,” here are two ways to do it.

Related diversification happens when your product and your new market are somehow connected to the previous ones. A real-world example is the leather shoes manufacturer who starts producing wallets and belts. They might use the expertise they gathered while running the previous venture. Still, they are selling new products to a slightly different customer group.

Unrelated Diversification

What’s unrelated diversification? It’s basically starting everything from scratch. It might be scary since you’re sailing into unknown waters once again. The risk is also, without any doubt, significant. So why bother? The answer is simple. If this venture succeeds, you are the owner of two profitable companies operating independently. This is the way empires are built. On a more practical note, this is how you secure your financial future.

How to Apply the Ansoff Matrix to Scale Up a Digital Company?

Now that you understand the framework, here’s how to apply it to digital products. The same four strategies work, but digital businesses have some unique advantages.

Ansoff matrix modified

If you’re reading this, I assume you own (or co-own) a company that’s already reasonably successful. That’s excellent news. Now it’s time to go for more.

Digital Market Penetration: Old Product, Old Market

For digital products, Market Penetration means doubling down on marketing to your existing audience. Pragmatically, it’s a good idea to start with the lowest risk and expand your market share. With this growth strategy, your options are basically the same as for any other product. To paraphrase the famous campaign slogan: “It’s the marketing, stupid.

The best way to increase the market penetration for your product, digital or not, is to market it. The difference? You can focus entirely on digital marketing. Why? Because both your clients and your prospective clients are already familiar with the internet. What can you do?

You can work on your social media presence.
You can start building a community around your product.
You can come up with your own unique concept*.

*After all, the digital world is still expanding. Maybe you can partner with a game development studio and get your product into their game?

Think of Netflix. Before expanding globally, they focused on dominating the US streaming market through aggressive content marketing and word-of-mouth growth. They built a solid base first, and only then moved on to other strategies.

Market Development for a Digital Product: Old Product, New Market

Market Development for digital products often means making small adjustments to reach entirely new customer groups. You’ve dominated your current market and want more. The Market Development strategy lets you grow at a reasonable pace without the risk of building something entirely new.

What can you do with your digital product to reach new markets without significant risk and costs? Have you thought of tweaking the design a bit? If your product isn’t tied to one specific customer group, reaching another might be easier than you think. Think about accessibility. Sometimes changing minor things like fonts or contrast can significantly improve the experience for new customer groups.

Don’t forget to keep an eye on emerging platforms and channels. Being an early adopter of new technologies usually pays off.

Digital Product Development: New Product, Old Market

Digital Product Development is where technology takes center stage. You’re building something new for people who already trust you. Unlike Market Development, which focuses on business adjustments, this approach is mostly about technology.

What can you do to scale your business using this strategy? By now, you probably have all the data about your customers. Look at it carefully. Can you see any problems they might have? Maybe you can even ask them? After all, they trust you. They’ve already bought your product once.

When you manage to find a problem you can solve, you know the drill. You build an MVP; you release it; you test it and tweak it until it’s perfect. Yet, this time it will be easier. You already have customers. You can market directly to them. You can try to sell your new product and your old product as a package. You can offer discounts. The possibilities are limited only by your imagination.

Spotify is a great example here. They started as a music streaming platform, and then expanded into podcasts. Same users, new value proposition. Their existing subscribers didn’t need convincing about Spotify’s quality; they just needed a reason to use the app even more.

(Digital) Diversification: New Product, New Market

Diversification means starting over, but with the safety net of your existing successful business. If your company is doing great and you need a challenge, this is the strategy for you. The key to even considering it is having a healthy, prosperous business. A solid base lets you take risks without jeopardizing everything you’ve built. There are two ways to diversify.

In related Diversification, you stay within the digital world but change both variables: new product, new customers. Say your product is a calendar app. If you decide to introduce a fancy reminder app, that would be Product Development. People using your calendar are likely to be interested in a reminder as well. But, if you decide to design a photo editing app, that’s diversifying your business. Calendar app users don’t necessarily need photo editing tools. Yet, the digital world is something you are familiar with. Even with this new market, you can at least partially rely on your experience.

Amazon’s move into cloud computing with AWS is a famous example. They went from e-commerce to infrastructure services, a completely different product for a completely different customer base. Yet, their expertise in building scalable systems transferred directly to the new venture.

Unrelated Diversification

Unrelated diversification is, you wouldn’t guess, unrelated to anything you’ve done before. If you decide to pursue this growth strategy, it doesn’t matter what you are doing now. You can open a restaurant; you can start a bakery or begin selling board games.

Choosing Your Strategy

Here’s a pragmatic reality: most successful companies don’t pick just one quadrant. They combine strategies based on their resources and risk tolerance. You might pursue Market Penetration as your main focus while testing Market Development in a new region. The Ansoff Matrix isn’t about choosing one path forever. It’s about understanding your options and making informed decisions.

Consider these factors when deciding:

Market saturation: If your current market is nearly maxed out, Penetration offers diminishing returns.
Available resources: Product Development and Diversification require significant investment.
Risk appetite: Early-stage companies might stick to Penetration; established ones can afford to diversify.
Competitive landscape: Sometimes you need to expand before competitors claim new territories.

Conclusion

The Ansoff Matrix is the kind of tool you’d call old but gold. Igor Ansoff first described it in 1957 when the world was a completely different place. It was long before the invention of the internet. Yet, nearly 70 years later, it can still be successfully applied to scale companies, including digital ones.

Your next step? Take a look at your current growth initiatives and map them to the matrix. Are you putting all your eggs in one basket, or spreading your efforts across multiple quadrants? Understanding where you stand is the first step toward deciding where to go next. If you’d like help applying the Ansoff Matrix to your digital business, get in touch. We’d love to hear about your growth plans.

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