The key to growth is future demand. Any acquisition you consider needs to take this factor into account. There are multiple ways to look at demand, and it’s essential to know which one is most appropriate for your company. I use a simple but powerful tool I call the Opportunity Matrix. It’s a way of understanding where you want to position your company strategically, looking forward.
The opportunity matrix is a two-by-two grid: The vertical axis is for products and services, while the horizontal axis is for markets and customers. The grid enables you to assess both existing and future demand.
There are four quadrants in the opportunity matrix:
1. Consolidation: selling more of the same products to the same market
2. Distribution: selling the same products to new markets:
3. Breadth: selling new products to your existing market
4. Diversification: selling new products to new markets
Today I want to focus on the third quadrant, breadth, bringing new products and services to customers in the markets you are already serving.
Let’s take an example of how an acquisition can support this choice. Look at Dropbox’s recent acquisition of Orchestra, the maker of Mailbox.
Dropbox, as you may know is used for sharing large files and Mailbox is an email app that’s garnered rave reviews since its release in February. Mailbox brings a complementary and unique technology that will serve Dropbox’s customer base.
Mailbox already has $5.3 million in venture capital behind it and Dropbox has also grown quickly, expanding from 100 employees last year to 250 employees this year. Through this acquisition, both companies will be able to go to the next level, by expanding the product offerings to their respective customer bases.
This is an alliance to watch. Check back in six months to a year and see what has happened. My expectation is we will see significant overall growth.
Update: Dropbox has partnered with Yahoo! Mail to make it easier to send and receive attachments. For Dropbox, this strategic partnership focuses on distribution, bringing new customers to Dropbox’s existing services.
*This post was adapted from David Braun’s Successful Acquisition, available at Amazon.com
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