Insights — Channel Creation & New Revenue Streams — 3 min read
How to Identify Adjacent Markets
Adjacent markets are the lowest-risk form of expansion. They allow you to leverage what you already know while reaching customers you don't currently serve.
In short
To identify adjacent markets, look at four dimensions: your existing customers' other needs (Customer Adjacency), the industries that use similar technology or processes (Capability Adjacency), the products sold alongside yours (Product Adjacency), and the geographic or regulatory parallels (Structural Adjacency). The best adjacent market is one where you already possess a significant share of what is needed to succeed, and only have to build the final portion.
Most businesses think of growth as either 'doing more of the same' or 'doing something completely new'. Both have problems. 'More of the same' eventually hits a saturation point. 'Something completely new' is high-risk and often fails because the business doesn't have the necessary expertise.
The middle ground is the adjacent market. An adjacent market is one where you can use your existing products, skills, or distribution channels to solve a slightly different problem for a slightly different audience. It is the art of moving one step sideways, rather than jumping into a different building.
The Four Dimensions of Adjacency
Finding an adjacency is not a creative exercise; it is a mapping exercise. You are looking for the shortest bridge between where you are now and where there is untapped revenue.
1. Customer Adjacency
What else does your current customer buy? If you sell office furniture, your customers also buy office fit-out services, IT hardware, and commercial cleaning. Moving into one of these is a customer adjacency because you already have the relationship and the trust.
2. Capability Adjacency
What else could your equipment or skills do? A company that manufactures precision parts for the automotive industry has the 'capability' to manufacture for the medical device industry. The product is different, but the 'how' is the same.
3. Product Adjacency
What product is the 'natural partner' to yours? If you sell industrial lubricants, an adjacent market is the filters or the application machinery. You are moving up or down the value chain within the same industry.
4. Structural Adjacency
Where else does the same 'rulebook' apply? If you are an expert in UK building regulations for residential homes, the 'structural adjacency' is the regulated sector for small commercial premises. The rules are similar enough that your expertise carries weight.
Evaluating the 'Distance' of the Adjacency
Not all adjacencies are created equal. Some are 'near' (easy to reach) and some are 'far' (harder than they look).
| Adjacency Type | Leverage | New Requirement |
|---|---|---|
| Near Adjacency | Same customers, same product | Different application |
| Medium Adjacency | Same capability, different industry | New sales network |
| Far Adjacency | Same brand, different product | New supply chain |
The 'Only 20%' Rule
Evans Sales Consultancy uses a simple rule for adjacent markets: if you have to build more than a small portion of the proposition from scratch, it's not an adjacency — it's a new business. If you need a new brand, a new sales team, a new product, and a new supply chain, you are diversifying, not expanding. True adjacency relies on the 'unfair advantage' of your existing assets.
Our Opportunity Engine can help identify these bridges by looking at where your current competitors are successfully 'leaking' into other sectors, or where your customers' procurement patterns suggest a hidden need.
Could your business support another route to revenue?
Evans Channel Creation identifies, validates and builds additional revenue channels from capabilities a business already has — B2B to D2C, D2C to B2B, product to service, recurring revenue or partners — and says so plainly when a channel should not be built. Programme from £1,995 + VAT per month over six months.
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