How to find new growth areas: job, permission and distance

How do you find the next growth area?

You find the next growth area where three things meet: a job customers are poorly served on, a brand with permission to do that job, and a distance from the core your organisation can afford. At IW Agency, we call these job, permission and distance. Miss one and you get a product nobody needed, or a brand stretched until it means nothing.

Most companies start with distance and skip the other two. They look at what they could make next to what they already make. In a study of business launches across 108 companies, 86 per cent were line extensions and only 14 per cent aimed at new markets. The extensions brought 62 per cent of revenue but only 39 per cent of profit (Kim & Mauborgne, Harvard Business Review, 2004).

We read that as a warning, not a ban. Line extensions keep the core healthy. The next growth area is usually found by looking at people first and products second.

Conclusion: Growth starts with an unmet job, not an empty shelf.

What do you need before you start?

You need three things in place: a clear brand platform, an honest picture of your core, and a mandate to spend on uncertain bets. We think the platform is the one most often missing. Without a shared view of what the brand stands for, every idea looks equally plausible, and the loudest one wins.

1. A brand platform everyone can repeat. It sets out what you stand for and who you are for, which defines the limits of your permission. See what a brand platform is and when you need a new one.

2. A clear view of the core. Know which products and audiences carry the business today, and why people choose them.

3. An owner and a ring-fenced budget. Exploration judged on next quarter's sales gets cut in the next quarter.

Since 2007 we have worked with Arla to evolve its product portfolio and shape a clear ambition for it. In our view, that kind of ambition is what makes the question "what next?" answerable at all. A sign you are not ready is a leadership team that cannot agree on what the brand would never do.

How do you find jobs your customers are poorly served on?

You find them by studying the progress people are trying to make, not the products they buy today. Christensen and colleagues put it directly: "The key to successful innovation is identifying jobs that are poorly performed in customers' lives and then designing products, experiences, and processes around those jobs" (Christensen et al., Harvard Business Review, 2016).

1. Map the job. Interview recent buyers and recent leavers about the moment they chose. Ask what they were trying to get done, not what they think of the product.

2. Look for workarounds. One of the authors' questions is: "What surprising uses have customers invented for existing products?" Every workaround marks a job someone is doing badly.

3. Write down the feeling. The authors stress that jobs have social and emotional dimensions as well as functional ones. Record what people want to feel and how they want to be seen.

4. Talk to non-customers. Cirque du Soleil grew by pulling in people who had never been circus customers at all (Kim & Mauborgne, Harvard Business Review, 2004).

The best-known example in HBR's summary of the article involves condominium developers selling to retirees who were downsizing. Sales stayed weak until the developers saw that their business was transitioning lives, not construction. We think the emotional side of the job is where brands find their edge.

Conclusion: The feeling is part of the job, not the campaign.

How do you know how far your brand can stretch?

Your brand can stretch as far as people's feelings about it travel. That is often further than the product category, and less far than the business plan hopes. We test permission by asking what the brand means to people, not what it makes.

1. Name the meaning. Describe in a few words what people feel the brand stands for.

2. Test the job against it. Would people find it natural for this brand to take on this job?

3. Find the bridge. Identify what carries over: craft, quality, a tone, a ritual.

4. Choose the brand route. Masterbrand, endorsed brand or a new name. The further the move, the more the choice matters.

Gustavsberg faced the permission question in its purest form. The task was to move a functional brand from serving professionals to inspiring a broader audience, without losing what made it great with professionals. We also think permission matters more now that AI assistants mediate choices. Assistants repeat what a brand is already known for, so a growth area you cannot credibly own is one they will hand to someone else.

How do you choose between adjacent and transformational bets?

You choose by building a portfolio rather than betting on one idea. Studying firms in industrial, technology and consumer goods sectors, Nagji and Tuff found that outperformers typically put about 70 per cent of innovation resources into core offerings, 20 per cent into adjacent efforts and 10 per cent into transformational initiatives (Nagji & Tuff, Harvard Business Review, 2012).

We treat that split as a starting point, not a rule. A food brand in a slow category and a software company will rarely land in the same place.

1. Sort ideas by distance. Core improves what exists. Adjacent brings existing strengths to a new audience or need. Transformational creates a new market or model.

2. Fund each lane on its own terms. Judge the core on sales and adjacent bets on learning milestones. Judge transformational bets on the options they open.

3. Give far bets their own identity when needed. Some moves are too far for the core brand to carry.

4. Review the portfolio as a whole. Look at the balance at least twice a year, not project by project.

When Enfo decided to demerge part of its organisation into a new data consultancy, the move was far enough to need a brand of its own: Epical.

How do you know it is working?

It is working when the new area gets chosen for the same reasons the core does. The signs:

• People describe the new offer in the brand's words without prompting.

• Early buyers include people outside your current base.

• The new offer makes the core feel more relevant, not diluted.

• Learning milestones arrive on time, even before revenue does.

The warning signs are just as clear. You need discounts to get anyone to try it. Internal debate is about the logo rather than the job. When Designonline.com became Nordic Nest, the aim was a premium brand experience rather than a generic shop. That is the test for any growth move: whether people choose it for the brand, not the price.

What does this mean for your brand?

• Start with people, not the product range. Map unmet jobs, including the emotional ones, before you look at line extensions.

• Write down your permission. Agree in a few words what the brand means, and test every idea against it.

• Fund distance on purpose. Decide your split between core, adjacent and transformational before the ideas arrive.

• Give far bets room. Measure them on learning, and give them their own brand when the core cannot carry them.

Frequently asked questions

What is an adjacent market?

An adjacent market is one where a company uses capabilities it already has to serve a new audience or a new need. It sits between improving the core and creating something entirely new.

Is a brand extension the same as a new growth area?

No. A brand extension puts the existing brand on a new product. A new growth area answers a job the business does not serve today, and it may or may not carry the existing brand.

When should a growth area get its own brand?

A growth area should get its own brand when the core brand's meaning cannot credibly stretch to it. A separate brand also helps when the new venture could harm the core if it fails.

Should every company follow the 70-20-10 split?

No. The split describes a pattern among outperforming firms, not a rule. Faster-moving categories may need more in transformational bets, and slower ones less.

Start with the job

The next growth area is rarely hiding in the product range. It sits in a job people are poorly served on, which your brand has the right to do, at a distance you can fund. If you want to work through job, permission and distance for your own brand, write to us at hello@iwagency.com.

Sources

• Blue Ocean Strategy — Harvard Business Review, 2004

• Managing Your Innovation Portfolio — Harvard Business Review, 2012

• Know Your Customers' "Jobs to Be Done" — Harvard Business Review, 2016