Adjacency expansion

What is adjacency expansion?

Adjacency expansion is growth that moves from the core business into a closely related market, customer group or capability. Chris Zook and James Allen of Bain & Company studied these moves in a 2003 Harvard Business Review article, "Growth Outside the Core." They reported that adjacency moves fail about three-quarters of the time, and that the ones that work build on a strong core.

Why it matters to a revenue leader

Adjacent growth is a common logic for services roll-ups, as when an inspection company adds repair work or a fire alarm company adds security monitoring. The revenue leader inherits the hard part, which is getting the core team to sell the new line to customers who know them for something else. Zook and Allen found that the strongest adjacencies often sit with a company's most important existing customers.

A fire inspection company with 3,000 inspection agreements adds kitchen hood cleaning, a service its customers already buy from someone else. Sellers offer it at renewal, and 450 customers, or 15%, add it in the first year.