Lesson #5: Market Expansion – Unlocking New Growth Streams And Leveraging New Opportunities With Confidence

For founders and CEOs, expanding into new markets or launching new revenue streams is both a thrilling and risky endeavor. You want to grow, in fact you need to grow, and as a result the lure of untapped opportunity is strong.  However, the path to expansion is littered with companies that lost their way by straying too far from their core.  There are far more failures than successes when opening new markets or expanding in existing ones. These expansion effort failures are not only costly, but they often can have a lasting, long-term negative impact on the health of the core business.   The lesson from my experience scaling and selling a business to Walmart, experience from other companies I have led, as well as from studying the world’s most successful market expansions—is that discipline and alignment with your core strategy are non-negotiable.

Common Mistakes CEOs Make When Expanding Revenue Streams

When looking to expand revenue streams or increase market penetration, there are multiple errors that CEOs make. Below are just a few:

• Losing Sight of the Core Business – A frequent pitfall is chasing growth by entering markets or launching products that are too far afield from the company’s strengths.  I think of it as standard deviations from your core.  You can sometimes have success if you stay within one standard deviation from your core (slight product changes, tangential industries, etc.), but often CEOs venture out 2, 3, even 4 deviations from their core.  This dilutes focus, drains resources, and erodes the competitive edge that made the business successful in the first place.
• Expanding Without a Clear Vision or Strategy – Many CEOs leap into new markets without a well-defined plan or a deep understanding of customer needs in the new segment. The opportunity is so exciting, so shiny, so tantalizing that they jump into these new endeavors without pressuring testing them first against their core business and purpose.  This lack of clarity and alignment can lead to wasted investment and confusion within the organization.
• Underestimating Execution Complexity – New markets often require different capabilities, operational models, or regulatory compliance. CEOs sometimes underestimate the complexity and cost of adaptation, leading to underperformance or outright failure.  The simple fact is that your current business model works well for what areas you focus on today.  Once you get outside of your core focus and attempt to tackle new markets, a lot of your core operational expertise, process design and systems, and ways of working simply don’t align with what is needed in the new market.
• Ignoring Customer Feedback and Market Signals – Failing to listen to existing customers or to adapt offerings for new segments can result in missed opportunities or products that don’t resonate.  Many companies don’t talk to their customers enough, or they don’t ask the right questions, to fully grasp what future opportunities may or may not exist.  Additionally, often the allure of the new market is so compelling, CEOs miss seeing the yellow and red lights that are in their direct path that outside observers see so clearly.

Best Practices for Expanding Revenue Streams

All that being said, expanding your business can be very beneficial.  Those organizations that approach it with the type of rigor outlined below will on average be more successful.  Those CEOs that pause, kick the tires hard on the new idea/opportunity, proper calculate the opportunity costs, and in turn jump in eyes wide open will be in a much better position to succeed.

• Evaluate Every Opportunity Against Your Core Strategy – The absolute number one thing CEOs and their leadership teams should do before pursuing any new market or revenue stream, is to rigorously assess whether the opportunity aligns with your company’s mission, values, and unique capabilities. This isn’t easy work – it takes a lot of healthy, no ego, no bias, fruitful discussions, but you are better to get all the facts on the table and transparently pressure-test the new market idea.   If an opportunity doesn’t reinforce your core, you have to say no—no matter how tempting.   This approach worked well for us at MeMD when we passed on an opportunity to turn our telemedicine platform into a SaaS model when Covid hit.  We could have probably done well at least short term with new revenue from health systems and care practices, but it didn’t align with our core purpose and our longer-term strategy.  We quickly said no, and that turned out to be an incredibly good decision.
• Leverage Low-Barrier Channels for Existing Products – Look for new distribution channels or geographic markets where your current products already have a fit and the barriers to entry are low. Think of my standard deviation approach – thoroughly analyze where there may be demand for your current products, if the barriers to entry are low, and if the total addressable market is large enough.  If so, then study the opportunity cost of diverting resources and come up with your best estimation on how the overall business will be impacted, favorably or unfavorably.  Try to be as objective as possible so your view isn’t clouded – consider leveraging an outside resource or coach to challenge you and your team’s thinking and analysis.
• Deepen Value in Existing Markets – Rather than always looking outward, consider how you can serve your current customers more deeply. This could mean bundling products, adding complementary services, or innovating features that drive retention and increase wallet share.  When I was the President of a chemical manufacturing company, I came up with an idea to use the same type propulsion system you find in spray on sun screens.  At the time no one was using this technology outside of that use case, and we were the first to introduce it in the application of chemicals.  Our B2B customers loved this new technology – they bought more of our products and used more of them as a result, increasing sales and margins significantly.  Additionally, we made the switching costs that much higher.
• Modify Existing Products for Adjacent Segments – Adapt your offerings to meet the needs of closely related customer groups or industries.  This approach leverages your existing strengths while minimizing risk and resource drain.  However, the modifications have to be minimal and have very limited impact on your core business.  Remember, any dollar spent or hour allocated outside of your core business needs to have an outsized return on investment – otherwise don’t do it.
• Build New Solutions Only When They Drive Depth and Retention – If you do develop new products, ensure they are designed to increase engagement and loyalty among your existing customer base, rather than pulling your organization in too many directions.  I have seen so many solutions all these bells and whistles have been added that leaders believe will make their solutions stickier with customers, but in the end, their customers didn’t value those additions.  If you want to drive depth into your customers, you have to ask the right questions to illicit objective answers.  You may not like what they say, but that is far better than designing something you think they want that they actually don’t remotely care about.

How to Open New Markets With Confidence

Once you are committed to opening a new market or a product expansion, make sure you have the following in place:

• Only expand when you have a clear, data-backed understanding of the new market’s needs and how your core strengths apply.  Do not launch until it is clear.
• Consider starting with pilot programs or partnerships to test the waters before committing significant resources. While this option isn’t always available, at least investigate thoroughly to see if an opportunity exists.
• Identify essential KPIs (Key Performance Indicators) ahead of time and monitor them closely after launch.  Be ready to pivot or pull back if results don’t align with your expectations.  Consider doing a “pre-mortem” before you launch (read the article from the Harvard Business Review).   This allows you to plan out various scenarios ahead of time and be ready with actions to take should things go off the rails.

Bottom Line

Market expansion and increasing depth in existing markets is often essential for long-term growth, but it must be approached with discipline and strategic alignment. Remember to evaluate every new opportunity against your core strategy, focus on channels, products, or solutions that deepen your connection with existing customers, and that leverage your unique strengths. If an opportunity doesn’t fit, have the courage to say no. Sustainable growth comes not from chasing every possibility, but from unlocking new streams that reinforce what you do best.

For any additional questions, additional resources, or to learn more on how my organization helps organizations scale more effectively, please visit Bill Goodwin, MBA.