Businesses have long grown by expanding into new markets. But new technology is changing the dynamics by which companies can leverage their current positioning to enter related, but less similar, markets than in the past. ‘Radical adjacency’ is a term that has been applied to such expansion, and technology firms themselves have been among the first to find success with this strategy.
The second of two recent Gigaom Research reports by Haydn Shaughnessy focused on innovation, “Renewing tech-company growth via radical adjacency”, looks at some examples of tech companies that have succeeded (and some that have failed) in their expansion by radical adjacency.
According to the principle of algorithmic innovation, as introduced in our exploration of Shaughnessy’s earlier innovation report, recognizable patterns of technology adoption and technology-driven change spread from industry to industry. Thus, enterprises beyond the technology sector, can look to early experiences there as to how new technologies are disrupting markets—and expect that similar dynamics may be headed in their direction as well.
What are some of these patterns of radical adjacency in tech companies?
- Extended competencies, such as Apple’s application of its miniaturization with the iPod and the third-party ecosystem of iTunes being applied to its entry into the smartphone market;
- Infrastructure, such as Amazon’s offering up its own IT infrastructure to the market with Amazon Web Services;
- New market entry, as with Google’s search and advertising services now joined by browser, mobile operating system and hardware, broadband infrastructure, and Google Glass offerings; and,
- Transforming the enterprise, such as IBM’s transformation from a leading hardware player to a leading services provider.
Many more attempts at radical adjacency are still underway, including Harman’s expansion from an auto audio hardware to a streaming audio company and Samsung’s move into health care with medical imaging acquisitions.
The pendulum seems always to be swinging along the spectrum from diversified to market-focused organizations or, as now, perhaps back again. But the nature of this expansion of markets is changing, with recent dogma as to ‘core competencies’ too restrictive for understanding the more fluid, extended range of competencies which organizations can leverage to grow and morph into new types of companies.