Anshoff’s

Ansoff’s Matrix, pain and gain Matrix, pain and

Growth strategies and adaptive learning gain
among small food producers
Gerald Watts, Jason Cope and Michael Hulme 101
Lancaster University Management School, Lancaster, UK

Introduction
This paper arises from a programme of research among food sector SMEs in
the North West of England. The research project included both qualitative and
qualitative phases and its primary focus was on the growth and development
needs of the sample firms.
The first part of the title derives from the focus on growth and, more
specifically, strategies for growth relative to the four quadrants of Ansoff’s
matrix (Ansoff, 1965): market penetration, market development, product
development and diversification (Figure 1). In the analysis, we used this
framework to categorise growth strategies and then attempted to relate them to
other variables such as growth history and expectations.
The second part of the title is a reference to the inter-relationship between the
“personal” and the “business”, in that all of the sample were owner-managed
businesses. It is well understood that owner-management has significant
implications at the qualitative level (Bolton, 1971) and that many aspects of the
business, including objectives and strategy are closely related to the personal
characteristics and goals of the owner-manager. (Carson et al., 1995).
As a specific focus, we wanted to explore the usefulness of the Greiner life-
cycle model (Greiner, 1972) in interpreting the relationship between personal
and business experience and learning in a small firm. Greiner’s model depicts
growth as occurring through phases of relatively stable expansion interspersed
with periods of “crisis” which may result in successful adaptation and learning,
facilitating a further phase of growth (Figure 2).
At a broader level, we have set out to refine our understanding of the complex
relationship between the owner-manager and his or her business, in terms of
such factors as growth, horizons, aspirations, limitations and learning.

Theoretical overview
Enterprise growth
A basic problem exists in understanding growth, in that larger, developed firms
are so different from small firms “that in many ways it is hard to see that they
are of the same genus” (Penrose, 1959); the same author likens this growth to the
transformation from caterpillar to butterfly. To explain this metamorphosis in
Inte Jnl of Entrepreneurial
Behaviour & Research,
Vol. 4 No. 2, 1998, pp. 101-111.
This research project was sponsored by North West Fine Foods. © MCB University Press, 1355-2554
IJEBR
4,2 Current Products New

Current Market Product

Markets Penetration Development
102

New Market
Diversification
Markets Development

Figure 1.
Anshoff’s
product/market growth
Source: Iqor Ansoff. “Corporate Strategy”, McGraw-Hill. 1987

4. Crisis of
?
3. Crisis of
Red Tape
Size
of
Firm
3. Crisis of
Control

3. Growth
2. Crisis of through
Autonomy Collaboration

3. Growth
1. Crisis of through
Leadership Co-ordination

3. Growth
through
Delegation

2. Growth
through
Direction
Figure 2. 1. Growth
Age of Firm
through
Greiner’s life-cycle Creativity

more gradual terms, patterns of enterprise growth are frequently

conceptualised in the form of a business life cycle, comprising a number of
phases or stages (Churchill and Lewis, 1983; Miller and Friesen, 1984; Scott and
Bruce, 1987). These stages are then associated with generic management
problems and organisational characteristics.
 There is an intuitive descriptive reasonableness in such stage models and Anshoff’s
some longitudinal studies, such as that of Miller and Friesen (1984), have Matrix, pain and
managed to substantiate these general patterns of transformation, albeit in a gain
descriptive sense. Greiner’s model (Greiner, 1972) includes an element of causal
explanation in hypothesising growth as occurring in relatively stable phases,
interspersed with “crises”; at the crisis point, the organisation either
successfully adapts or fails. In this sense, the crisis may be seen as a necessary 103
catalyst of learning and further growth.

Adaptation and learning

The “crises” elaborated in the Greiner model are essentially internal; to continue
the lepidopteral metaphor, they may be likened to “growing pains” within the
protective case of the pupa. However, a business is very much an open system
(Bertalannfy, 1950) and, in this sense, a basic prerequisite of survival and
growth is “successful” adaptation to the environment.
There are many issues of conjecture here, not the least of which is how we
define the “environment” and to what is the adaptation being made. In the
discussion here, environmental change may occur gradually or rapidly; not all
“crisis-inducing” change is sudden or unexpected. In biology, extinction of a
species represents the ultimate in adaptive failure. Biologically such failure is
more likely to be the result of an inability to adapt to a series of local
environmental changes, often occurring gradually, rather than to single
moments of crisis – a macro-level parallel to Handy’s “boiled frog” (Handy,
1989).
What do we really mean by “successful adaptation” in the business context?
Not all adaptation is directional. In particular, the concept of learning implies
directionality or purpose: “the creature that learns is not the mythical
amphisbaena of the ancients, with a head at each end and no concern where it
is going. It moves ahead from a known past into an unknown future and this
future is not interchangeable with that past” (Wiener, 1950, p. 45).
The concept of purpose, intentionality of life span or the “survival instinct”
is closely related to notions of strategy and planning. It is at such a fundamental
level that concepts of strategy and learning might usefully be discussed in
relation to SMEs. Dawkins (1988) has suggested that “complicated things have
some quality, specifiable in advance, that is highly unlikely to have been
acquired by random chance alone” (Dawkins, 1988, p. 9), a quality of adaptive
ability.
One central concept relevant to this discussion is the notion of system
boundary – where does the “environment” start and end? Adaptive ability can
be linked to the idea of horizon or “range of vision”; Simon (1956) observed that
“we see that the organism’s modest capacity to perform purposive acts over a
short planning horizon permits it to survive easily in an environment where
random behaviour would lead to rapid extinction” (Simon, 1956, p. 134).
What becomes increasingly important is the notion of the interactive
relationship between the enterprise and its many micro environments. In
IJEBR systems terms, the “environment and system do not just co-exist side by side.
4,2 They interact to the point of mutual inter-penetration. Some aspects of the
environment become “internalised by the system and some aspects of the
system become externalised to become features of the environment” (Emery
and Trist, 1975, p. 43). A central concept here is the extension of the
environment in relation to the enterprise. Behind this lie notions of degrees of
104 environmental knowledge, degrees of specialised adaptation and limits placed
on knowledge of extended environments. Such limits may be completely
explicit, having a basis in knowledge of the extended environment and therefore
constituting a “knowledge strategy”, or may be implicit or even “instinctual”
with significant knowledge localised. However we conceptualise this, we should
be aware that we are talking here in terms of relative degrees, rather than in any
absolute sense.

Growth strategies
In the context discussed above, marketing strategy is a form of purposive
adaptation, in most circumstances (but not necessarily) informed by learning. It
might typically be proactive in nature, but the degree of proactivity is a relative
concept; SME strategy is often characterised as primarily “reactive” (Fuller,
1994).
Carson (1990) combines the concepts of limited proactivity and personal
management in the concept of an “involved” marketing style, describing how
small firm marketing is often characterised by a high level of direct involvement
on the part of the owner-manager and how it “relies heavily on intuitive ideas
and decisions and probably most importantly on common sense” (Carson,
1990).
Addressing the problem of strategic choice, Cravens et al. (1994) hypothesise
that “choice of marketing growth strategy (in an SME) is a function of strategic
situation, organisational characteristics, and entrepreneur motivations”
(Cravens et al., 1994, p. 247). Many authors have commented on the typical
limitations of strategic alternatives available to the small firm by virtue of such
factors as small market share and limitations of resources and skills (e.g.
Carson, 1985).
Because of these limitations, it has been suggested that certain strategic
alternatives are typically more appropriate for a small firm, namely those that
avoid direct competition with larger firms and that involve the development of
close customer relationships and product adaptation (Storey and Sykes, 1996).
In the specific language of Ansoff’s Matrix, it has been suggested by Perry
(1987) that for SMEs the most appropriate growth strategies are therefore
product development and market development.

Primary research and findings

Methodology
The primary research included three phases: a number of exploratory
interviews, a quantitative survey by means of a postal questionnaire supported
by telephone introductions and prompts, and a series of 25 face-to-face Anshoff’s
interviews with a selected sub-sample of the respondents. Matrix, pain and
gain
Sample profile
As defined by the sponsors, the sample frame included non-primary food
producers in rural areas of Cumbria, Lancashire and Cheshire. A sample of 256
firms was selected as the respondents of the mail questionnaire and 79 105
completed questionnaires were returned. The profile of the sample was as
follows:
• Age of firm. As shown in Table I, compared with the SME population as
a whole, the sample was older than average, with a flatter age
distribution than might be expected. This reflects the origin of many of
the sample businesses in the agriculture sector.
• Origins. A total of 68 per cent were founder-owners, while a further 16
per cent were continuing a family firm.
• Turnover. The distribution of annual sales is shown in Table II.
• Employment size. Employment ranged from self-employed to a
maximum of 395, with median employment at four full time and two part
time. As might be expected in this industry, employment reflected
seasonality of sales, with 51 per cent of respondents reporting
fluctuation in employment throughout the year.

Growth patterns and aspirations

Recent historical growth (last two years). As shown in Table III, most of the
sample (77 per cent) had experienced some sales growth over the last two years,
with 36 per cent reporting growth of over 10 per cent and 12 per cent reporting
growth of over 50 per cent.

Age (years) <5 5-10 10-20 20-40 >40

Table I.
Per cent 19 23 23 12 20 Age of firm

T/O (£m) <0.25 0.25-0.5 0.5-0.75 0.75-1.0 1.0-1.5 >1.5

Table II.
Distribution of
Per cent 53 19 4 6 4 13 annual sales

Table III.
Decrease Stable >10 10-25 25-50 >50 Percentage growth
patterns (over
8 14 41 19 5 12 past two years)
IJEBR Short-term growth expectations (next two years). Respondents were somewhat
4,2 more optimistic about future growth, with 47 per cent expecting to grow by
more than 10 per cent over the next two years, as shown in Table IV.
Of those forecasting growth, 76 per cent expected to create new jobs (full
time or part time).

106 Objectives and growth strategies

Business objectives. Respondents were asked to rank their objectives for the
business. The results are shown in Table V.
Sales growth took precedence, with 68 per cent of respondents naming
growth as the primary objective. Surprisingly few respondents appeared to
want to increase their personal (i.e. discretionary) time.
Growth strategy. Respondents were asked to rank their priority growth
strategies, according to the categories of Ansoff’s Matrix (the alternatives being
specified in familiar business language). Results are shown in Table VI.
Respondents placed a high priority on finding new customers for their
existing product range (penetration and market development), whereas they
gave a lower priority to the offering of new products to existing customers
(product development). On balance, there is limited support for Perry’s (1987)
hypothesis that product and market development would be favoured strategies.

Decrease Stable >10 10-25 25-50 >50

Table IV.
Percentage short-term
growth expectations 1 17 36 36 3 8

1 2 3 4 5
Objective (rank) (%) (%) (%) (%) (%)

Grow substantially 14 12 5 2 0
Grow moderately 54 6 6 0 1
Stay about the same size 3 0 2 3 1
Table V. Increase profit margins 22 31 11 1 0
Objectives and Obtain more finance 5 13 18 11 5
growth strategies Increase personal time 2 7 18 9 6

1 2 3 4
Growth strategy (rank) (%) (%) (%) (%)

Market penetration 22 15 7 11
Table VI. Market development 55 21 5 3
Priority growth Product development 12 25 24 2
strategies Diversification 121 7 15 22
 Sales growth expectations (%)
Anshoff’s
Growth strategy Negative 0 0-10 10-25 25-50 >50 Matrix, pain and
gain
Market
penetration 0 30 35 25 0 10
Market
development 2 15 33 42 4 4 107
Product
development 0 36 36 18 0 10
Diversification 0 20 40 20 0 20 Table VII.

Priority growth strategies were then cross-tabulated with growth expectations,

as shown in Table VII. This table therefore depicts the relationship between
favoured growth strategy and growth expectations, i.e. the outcome of these
strategies.
In exploring this relationship, one might expect to see an association
between high growth expectations and the more radical or higher-risk
strategies and vice versa, i.e. a strategy of market penetration being associated
with lower growth expectations. On the basis of these findings, however, there
does not seem to be much evidence of a clear relationship between strategy and
growth expectations. One interpretation of this could be confusion about the
language used to describe strategic alternatives; although a number of pre-tests
were carried out in developing the questionnaire, this may have been a factor.
Another explanation is that the adopted strategies were equally well developed;
there is no reason why a strategy of market penetration should not yield
significant growth. A further explanation is that at least some of the sample
did not have an elaborated business strategy in the conventional sense.
This issue was one object of exploration in the qualitative phase of this
research.

Qualitative evidence
Interview focus
The interview objective was to review the historical development of the sample
businesses through the personal account of the owner-manager, exploring the
concept of “crisis” and attempting to understand the basis and meaning of
“strategy” in each context.
The overall picture was one of immense diversity: of evolutionary pattern of
the business and of personal background, values and aspirations of the owner-
managers. What became strikingly apparent were the frequently occurring
accounts of “chance” incidents causing changes in business direction, not all of
which could be reasonably described as “crises”. On the other hand, there was
clear evidence among some businesses of a consistent strategy with relatively
long-term horizons. A full analysis of the interviews is beyond the scope of this
paper but the following vignettes will serve to illustrate a number of relevant
issues.
IJEBR Case 1: personal and business crisis
4,2 One interviewee ran a catering business but developed a small “traybake”
operation as a secondary venture. She was visited by someone who, by chance,
was the father of a major competitor. A few weeks after this incident, the son
(i.e. the competitor) visited the main customer and took away the business. At
the same time her mother died; the outcome of these two incidents was a period
108 of depression. However, the interviewee recounted how she came out of this
experience thinking “I’ve got lots to live for” and resolved, with later success, to
develop the tray-bake venture as an alternative main business.

Case 2: reframing of personal motivation and aspirations

Another interviewee had become bored with his current business – a delicatessen.
He was buying an important ingredient from a local company and found that the
business was about to be sold. He bought the business and operated it in parallel
with the original venture but soon found that he enjoyed it much more, in terms of
the challenge and the pattern of working life. He decided to concentrate on this
venture and successfully developed it to become the premier regional supplier; in
retrospect, he observed that this incident “changed his life”.

Case 3: an operational crisis leading to critical learning

Another respondent recounted a critical incident in which his freezer broke
down, effectively bringing his business to a halt. He felt obliged to go round all
of his customers and apologise for the disruption. This incident taught him
both the importance of maintaining vital equipment and the value of customer
relationships. More generally, he learned “not to take things for granted” and
that he “should do it properly if he’s going to do it at all”.

Case 4: unplanned acquisition forcing adaptive learning

Another interviewee was a farmer, one of whose customers, a specialist fish and
game retailer, got into financial difficulties and defaulted on payment. The
farmer acquired the business in lieu of debts and, although he had no
experience of a retail business, operated it in parallel with the farm. He made it
work after an uphill struggle: “it was a shock not to have a guaranteed customer
… I was stung a few times – a very expensive learning curve.”

Case 5: long-term market development strategy

Another farmer was a producer of very high quality lamb, which, as is practice,
was sold at auction; however, he always wanted to market his own product. He
could also see subsidies coming to an end, which increased his resolve. He
experimented with direct sales from his house, gained experience and confidence
and now sells through three channels: direct, mail order and specialist dealer.

Case 6: successful opportunistic diversification

The proprietors of an historic water mill generated revenue by offering tours
and producing specialist flour. Soon after acquiring the business, they realised
that large numbers of people passed the door on the local train and on the Anshoff’s
bridleway, representing an attractive potential market, although walkers were Matrix, pain and
not previously made welcome on the site. They built a tea-room and have gain
successfully expanded the business.

Case 7: financially driven diversification

A producer of cakes found that competition had increased to the point that, 109
although he had increased output tenfold, profits had barely doubled. Seeking a
route to higher margin products, he started designing new product ranges from
the customers’ perspective and is now successfully exporting to Canada.

Conclusions
Strategy and adaptation
All of the cases discussed here are examples of successful “adaptation”; most
resulted in what could be described as a new “strategy”. They represent
diversity in many dimensions: timescale, motivation, degree of proactivity and
impact, both positive and negative, on the owner-manager and on the business.
Some of these are clear examples of “strategy that happened” or “emergent
strategy” (Mintzberg, 1994) rather than the deliberate, logically planned or
“intended” notion of strategy often espoused within the planning literature.
What has earlier been described as the “instinctual” combines concepts of
learning and action as strategy in one node within the enterprise’s
environmental network. Such a strategy may not be explicit but rather tacit and
localised. Importantly, at this level of discussion there is little or no distinction
between tactics and strategy: “we find that the optimal strategy is just the
simple tactic of attempting to do one’s best on a purely local basis”
(Schutzenberger, 1954, p. 98). Ashby (1960) takes this argument further to
suggest that within such micro environments “the best tactic in the
circumstances can be learnt only on a trial and error basis and only for a
particular class of local environmental variances” (Schutzenberger, 1954,
p. 197).

The business life cycle and “progress”

Scott and Bruce (1987) describe the birth phase of the business life cycle as
being characterised by “owner-run firms trying to establish a niche for
themselves through much product innovation”. In this sense, many of the firms
studied might be described as permanently in the birth phase.
This serves to illustrate one fundamental problem inherent in the very
concept of the life cycle. Key words in this discussion have been environment
and growth; an underlying but unspoken concept is that of unilinear
development or “progress” . A consistent theme in our discussion, illuminated
by our research, is that “growth” should more usefully be placed within an
environmental context and should not be confused with progress, if the latter is
seen as an imposition upon environmental change. Indeed, growth here can be
IJEBR characterised as symbiotic within environments, i.e. growth is not an
4,2 “imposition” but rather an adaptation.
We have earlier used the term “instinctual” to characterise enterprises
operating in a purely local environment. Learning and strategy is task based
and the level of local adaptation is high. However we must avoid the common
mistake of regarding such enterprises as in “non-progressive” stasis and lesser
110 “successes” when compared to enterprises actively seeking to extend their
environment. The act of survival in this view is itself an active notion – indeed
to maintain the Emery and Trist line one may go further and relate extinction to
a failure of the enterprise to act symbiotically over time. Therefore the sole
measure of “success” may well be nothing more than temporal survival related
to the enterprise’s intended life span.

Boundaries, learning and intervention

So often it seems that the owners’ boundaries of vision, in both lateral and
longitudinal senses, were simply too narrowly defined and that substantial
benefits might derive from their expansion. Uexküll (1920) wrote that “every
organism cuts out a special part of the environment which part then becomes
its reality. The rest of the environment simply does not exist for the organism” .
In this sense, the bakery in Cumbria supplying within a 30-mile radius has a
more limited environment than the national producer.
However, the local enterprise is embedded within many networks within this
environment and indeed “the firm’s effectiveness will be a function of how well
it integrates the various types of network relationships” (Gibb, 1996). While
these networks “attach” to wider environments, it is their specific localised
manifestation which forms the immediate topography of the local environment.
Based on the environmental adaptation model it is reasonable to argue that a
key role of training in small firms becomes one of extending environmental
awareness such as to stimulate generative learning beyond its naturally
occurring level.

The owner-manager and the business

Clearly, the frequently-acknowledged “overlap” of the “personal” and the
“business” is much more than this; instead, it is a super-complex system of
evolving experience and learning that is informing horizons, goals and
strategies, sometimes subtly, sometimes radically.
Rather than a unidirectional influence of the owner-manager over the
business, we find it useful to characterise the relationship as mutual and
interactive: owners share learning with their businesses and there is mutual
cross-influence in this process. Similarly, the development process can more
usefully be conceived as multilinear or multi-directional, therefore also
complicating the idea of growth itself.
In this context, the concept of “crisis” is clearly problematic, in that the
causality of learning and growth is much more complex than that suggested by
the Greiner model. This was borne out by our research, in that most Anshoff’s
interviewees found it difficult to recount specific crises of this nature. Matrix, pain and
Instead, we recommend that the “systems” view of the firm that we have gain
developed throughout this discussion provides a richer and more useful
framework for understanding these complex processes.
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