A streaming service begins offering games. An on-line retailer decides to offer computing services. When a well-known consumer brand is added to a product that previously didn’t seem within that company’s scope of products, many see this as evidence of “restless” growth; however, these expansions typically begin with a basic and practical question: What does the company currently own that can be beneficial elsewhere?
The answers to these questions (audience, technical ability, etc.) create opportunities for companies; however, there are limitations placed upon them.
Using Existing Customers’ Familiarity to Gain Exposure
An example of expanding through an existing audience is illustrated by Netflix’s introduction of mobile gaming in November of 2021. Their initial offerings included 5 games, including 2 games related to Stranger Things. Access to all of the games was available at no extra cost beyond your Netflix subscription and without any in-app purchases.
It was simple to understand why someone who was viewing a series would want to explore other ways to spend time with the same characters. Also, Netflix was able to promote the games via their app which provided subscribers a convenient method of accessing both types of content in one location. This allowed Netflix to avoid having to establish themselves as a completely new entity prior to introducing the new product.
As you can imagine, selling a new product/service to existing customers presents several advantages. Since the customer is already familiar with the brand, its new product or service may be easier to bring to their attention. Additionally, since they share a common subscription relationship with the original product/service, it eliminates the necessity for them to make an additional purchase decision. However, neither factor guarantees that customers will continue to use the new product/service.
Viewing a dramatic program and engaging in video games represent different forms of entertainment/activities. Therefore, they require differing levels of concentration and an individual’s interest in one type of activity does not necessarily indicate an interest in the other form of entertainment/activity. Any company considering expanding to sell additional products/services to their existing customers needs to establish whether the new offering meets a customer need, rather than relying only on access to a customer base.
Transforming Internal Technical Experiences into External Services
At times the transferable resource lies behind the product. According to Amazon, the development of AWS began when Amazon operated its retail business. Through operating its retail business, Amazon experienced firsthand the difficulties and high costs associated with managing its internal IT infrastructure. In 2006, Amazon Simple Storage Service (S3) and Elastic Compute Cloud (EC2), two examples of external cloud computing services, became available.
Storing data and providing computing power were entirely different types of purchasing decisions than buying books or household goods. The basis for the connection existed due to Amazon’s internal experiences with technical issues that numerous other organizations face.
In order to expand utilizing internal capabilities, it is necessary to convert that internal capability into something that external customers can comprehend and utilize. Tools developed internally for employees’ use may rely upon implicit knowledge. Commercially viable services demand well-defined interfaces, billing options, support mechanisms and clear explanations regarding the functions of the service.
Therefore, the reuse of knowledge and experience represents a significantly different approach compared to merely reselling excess capacity. The potential opportunity for expansion occurs when a company recognizes repeated technical challenges and develops a service to address those problems.
A Similar Market Requires More Than Just Replication
GipsyTeam’s review of BC Poker describes BC.GAME’s expansion from casino and sportsbook services into a dedicated poker room, showing how a familiar brand can enter a related market with different operating requirements. The review also lists the United States among the countries whose residents cannot register. The parent brand often helps to communicate that the new offering originates from a familiar entity. However, it does not ensure that the product meets the requirements of its target audience. Poker is a good illustration of the difference. A multiplayer table requires individuals who are willing to participate in the same game at the same time. Participation numbers alone (across a broader entertainment business) will never guarantee sufficient players for all formats/stakes.
Therefore, a product team must assess more than just whether there is space on a menu to include another item. The team must assess the participation patterns for their customers, the types of customer support inquiries they receive and what enables them to successfully interact with their product. Although the brand connection provides insight regarding why the company expanded into this area, the service itself must continue to provide justification for users’ continued interaction with it.
Demand Must Be Demonstrated Post-Launch
As Google demonstrated with Stadia, even if you have technological capabilities which could allow you to deliver a service, the strength of those capabilities does not determine how many people will utilize your service. In September 2022, Google announced that it was discontinuing its consumer-facing gaming streaming service. Google attributed the decision to lower-than-anticipated adoption rates despite the underlying technologies having great potential.
This detail is important since demonstrating that a product has been delivered answers one question, but demonstrating that people are repeating use of the product is answering a completely different type of question. A useful analysis of growth includes assessing three questions:
1. What advantages/abilities can the organization leverage from its previous business model?
2. What new abilities or knowledge must the organization create for this new market?
3. What would constitute proof of ongoing demand post-launch?
Ongoing revenue generated by a new product should also be evaluated in terms of context. Is the revenue representing increased spending by the organization’s customers or is the revenue replacing spending in some other capacity for the organization? Ongoing expenses to support and develop the product should also be factored into an evaluation.
Digital organizations expand into adjacent markets due to the perceived opportunity to gain early traction. When evaluating expansion opportunities, understanding what advantage(s) your organization brings to a particular market and recognizing what your organization cannot accomplish provides a clear framework for evaluating opportunities.