With the winds of prosperity returning, Thailand's CEOs are again aiming for growth. But lifting their new initiatives off the ground requires mastering new techniques.

In the past, companies tried diversifying, entering hot new markets or building up their weaker businesses, often with mixed results. This time around, they are targeting moves into markets adjacent to their strongest businesses, such as from products to services, expanding into a major new market like China, or launching a new business based on a core technology or skill.

Many of the growth success stories of the past decade have been triggered by such sideways moves. Witness AIS's push into prepaid mobile phone services or the expansion of Vodafone from its base in the UK into Japan, among other places. Yet, adjacency moves can be treacherous, as well: Over the past 15 years, more than three in four failed to deliver sustained growth, our research shows.

So where will executives turn for strong new sources of growth? The trick lies in knowing the difference between an adjacency move and a leap into the unknown, particularly when the reasons can appear so enticing. Companies that build skill and competence in expanding into adjacencies can handle more moves, make better selections, anticipate them earlier, execute them faster, and make them pay off more often. Their adjacency talents make all the difference between being an also-ran and a winner.

So what differentiates these winners? The companies that succeed at adjacency expansion have generally mastered three important disciplines:

—Relentless repeatability. Developing a repeatable formula for adjacency expansion played a central role in the success of 70 percent of the best performing growth companies. Thai Union Frozen Products (TUF) started with a core focus on frozen tuna for export, branched into new frozen fish categories and then into other processed seafood products. It achieved this with a series of related acquisitions that entailed entry into new products and geographies. Revenues have surged to 34 billion baht in 2002, up from 13 billion in 1997, while maintaining a return on equity above 20 percent.

—Customer-driven innovation. More than 80 percent of the most successful adjacency moves came not from headquarters brainstorming sessions or M&A proposals; they came from extensive analysis of core customer needs. Hong Kong's Li & Fung demonstrates how managing complex supply-chain hassles for Western garment makers can turbocharge growth. Its revenues surged to HK$33 billion in 2001, from HK$13.3 billion in 1997. Explains CEO Victor Fung: "Most new sources of growth in our business now come from deeper and deeper understanding of customer details."

—Reinforcement of the core. The best adjacencies both strengthen and extend a company's core competencies . For example, Dell Computer studied the Asian market, looked at its direct-to-the-customer model, and decided it "will work anywhere in the world", said CEO Michael Dell at the time. Though initially criticised as a misguided attempt to "colonise the world" by sceptics, the strategy worked; it delivered 58 percent compound annual revenue growth in the Asia-Pacific region, rising to nearly $3 billion in 2001 up from minuscule revenue in 1994. From a distant follower position since the launch of its Thailand operation at the end of January 1997, Dell is now a top-three player in the Thai PC market.

TUF and Dell have also achieved profitable growth by expanding into geographic adjacencies, relentlessly entering new markets and building strong leadership positions. The key involves building from a solid domestic core business, and targeting the same customers, while changing a single variable—the geographic market. The formula has enabled TUF to replicate its early overseas success in the US. Similarly, Dell rolled out its direct-to-the-customer model in one Asian market after another, with little variation.

By Edmund Lin and Chris Zook. Mr. Lin is a vice president in Bain & Company's Singapore office. Mr. Zook, leader of Bain's Global Strategy practice, is the author of Beyond the Core. Mr. Lin can be reached at edmund.lin@bain.com