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Harvard Business Review

Four foundational elements your business needs to successfully enter a new market

Harvard Business Review
14 minute Read

In a series of forums we held recently with chief executives of large companies around the world, we uncovered a preoccupation with obsolescence and renewal. When we surveyed them, 65% of the CEOs predicted that in five to seven years their firms’ main competitors would be different from their main competitors today, and 63% said that new competitors with new business models would pose a major threat to their firms’ core business.

The CEOs projected that in the next decade 40% of the value their companies created would come from entering new markets and launching new business models. Clearly, the business landscape feels highly unstable to them — which is understandable, given that new technologies continue to upend industries and wipe out businesses at a remarkable rate.

The good news is that there has never been a better time for companies to try to build new engines of profitable growth. We are in the longest period of low interest rates in modern history. Besides being cheap, money is abundant: one study by Bain & Company estimated that global investment capital had tripled in the past three decades and stood at 10 times global GDP. In addition, high-growth industries today don’t require as much investment as they once did; disruptive businesses can scale up faster in size and power with less capital.

In the past the most reliable way for businesses to find their next wave of growth was to mine their one or two strongest core businesses and apply their most distinctive capabilities in adjacent markets. Classic adjacency strategies included moves into new geographies (IKEA’s launch of stores in China in 1998 and in India in 2018), new products (Apple’s entry into the wearables business in 2015 with the Apple Watch, which now outsells the entire Swiss watch industry), and new customer segments (Porsche’s foray into the suburban family market in 2002 with an SUV line that now outsells its classic sports cars in the United States by two to one).

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