Everyone is looking for an edge, or advantage, in business. How do we win? How do we get ahead? What is the angle that will drive our company’s success? But an edge is not just a term for advantage itself; it can also be the place where you can find that advantage.

We define an “edge” as the outer rim that frames what you do and separates it, quite conveniently, from what you don’t. Edges are frontiers beyond which something changes. When you proceed beyond this border in business, the main thing that changes is risk.

Edges are not necessarily clear. To the contrary, many edges are quite fuzzy. When you look to the horizon, are you always sure where the sea ends and the sky begins? In business, strategy edges are like that too. Rare is the exact definition of how a product is positioned, what value a product delivers, or where different customers give a business permission to play. We argue that opportunity resides in this very ambiguity. If its edges are not well defined, a business can redefine them, ever so slightly, in its favor. And by staying within this nebulous but familiar space instead of moving to the less comfortable adjacent expanse or beyond, a business can find brilliant new ways to leverage its existing assets.

Edges have another interesting property; they are the places where the inside and the outside meet. As such, they tend to be where the action is. In nature, in civilization, and, indeed, in business, the peripheries teem with the most fascinating interactions. Where things meet, opportunities abound.

The edge effect

Ecologists call the phenomenon we just described “the edge effect.” In the 1930s, Aldo Leopold, an American environmentalist, coined the term when explaining why quail, grouse, and other game birds were more prevalent in transitional agricultural landscapes than in single (homogenous) habitats like fields and forests. He posited that “the desirability of simultaneous access to more than one habitat” and “the greater richness of edge vegetation” supported a greater diversity and abundance of species.

Since then, scientists have given these borderlands a name — “ecotones.” Eugene Odum, whose classic text, Fundamentals of Ecology, helped to popularize this idea in the 1950s, described an ecotone as “an area or zone of transition between two or more diverse communities.” He was thinking about the border between forest and grassland or between sea and shore. Places of transition between two ecosystems, such as the edge of forests, shorelines, wetlands, cliffs and mountainsides, estuaries, savannah, tundra, and deserts, are where the greatest diversity and opportunity exist for both flora and fauna. At the edges, the populations, resources, nutrients, lights, and food from both ecosystems mix. Some species exist only in ecotones, given the uniquely fertile environment that the combination of the two worlds creates.

It is no surprise that academics draw parallels between the ecotones of nature and the “economic ecotones” of ports of trade and even extend the logic further to the routes that exist between them. Typically, these are also situated at the edges between civilizations. Great trade routes have seeded the major cities of the world and been the conduits for advancement. “Such a river of life as nowhere else exists in the world” is how Rudyard Kipling described the collection of cultural meeting points that make up the Grand Trunk Road.

Three types of business ecotones

We can also apply this concept of ecotones to individual businesses, to powerful effect. In our work, we have observed that this “transitional bonanza,” this “opportunity between things,” is alive and well at the level of individual corporations. As in nature, these phenomena are often familiar; once recognized, they may even seem obvious. However, before they are exploited, they must be spotted. Consider the many edges that frame a business.

First, there is the boundary where you and your customers come together. Of all the activities that an organization undertakes, this transition is the most important and certainly where all the money is generated. But just like the ecotones we discussed, the lines around a product or service are often imprecise. Companies frequently misgauge the desires of their customers, and those customers, in turn, can misconstrue the propositions of companies.

If you have ever been to a theme park or taken a cruise, you will recognize what we mean. While you could consider the booking or ticket of admission as your payment to enjoy all these suppliers have to offer — and, indeed, you have no obligation to spend any more to participate — you know that you are presented with endless opportunities to enhance your experience for a small (or not so small) incremental charge. These companies are masters of navigating the blurred lines around their core product.

Second, the temporal component of this interaction creates its own edges. In our nature analogy, the disruption and coming together, which occurs at the twilight transition between day and night, presents unique opportunities for animals to feed. As a result, a host of mammals, birds, and insects are most active during these times. Businesses, too, focus on temporal transitions. The relationship with customers can span everything from an exploratory shopping event to a lifetime of commerce. Even slightly modifying this period of interaction — the edge where the customer relationship begins and ends — is intuitively powerful.

Consider your own search for food. We expect that if you were in a grocery store today, you wouldn’t have given a second thought to the opportunities such a business has with a product as mundane as lettuce. Yet, someone had the insight to see that the journey to a meal for a customer who buys a head of lettuce isn’t complete: he has to wash it and chop it first before consuming it. This simple insight enabled the transformation of a commodity produce item to a highly profitable prepared food. Helping the consumer by going a step further is now an important way that companies like Whole Foods Market have transformed their economics and enhanced their relationship with the customer.

Third, there are all the assets, tangible and intangible, that collectively define a business. These have edges, too. If an enterprise takes careful inventory, it will find that many of the parameters that describe what is core and noncore to its business are equally vague. It may even find that there is some room for interpretation in the very use of these resources and capabilities. In this way, the edges of assets themselves create opportunities.

You may not be surprised that a company like Toyota uses technology it installs in all the cars it sells in Japan to produce data that powers its onboard GPS service. You may be more interested to know that Toyota recognized that the value of this data was not uniquely associated with its primary use. As we show in our book, this insight enabled Toyota to successfully launch a new business offering traffic telematics services to businesses and municipalities across Japan using the same data.

Asking the right questions

The goal of “Edge Strategy” is to discover new and lucrative ways to monetize your company’s foundational assets. The approach is to look beyond the core business to near-field offerings, where the most leverage (and, importantly, the least risk) resides. As with many worthwhile endeavors, the challenge is in knowing where to start.

Frequently, companies focusing on their core business ask themselves: “What are we best at?” This is an important question, of course. But the danger is that it can make the company too introspective, too distracted by its own competencies, and not sufficiently focused on the customer.

To find an edge opportunity, we propose starting with a different, and deceptively straightforward, set of questions:

• What do our different types of customers want (or need)?
• What could or should our solution include?
• Which of our assets would others value and why

This framework is competencies-based (inward out) rather than needs based (outward in), and much more naturally centers on the customer—the key to any profit-expansion effort. It is the best vantage point from which to begin a search. When you review a business this way, in the context of the three types of business ecotones discussed earlier, this naturally shifts your business orientation to reveal three corresponding types of opportunities. We call these product edges, journey edges, and enterprise edges.

The first, product edges, are the most prevalent. They arise when a product or service is imperfectly calibrated with some customers’ needs. With product edges, an opportunity exists to provide either more or less to certain customer segments in order to better satisfy their overall requirements. Some examples of this might be add-on accessories, complementary services, or options to extend, enhance, or modify a base offer. Each of these strategies creates a better configuration of the core offer for the needs of each unique customer.

The second, journey edges, recast the nature of a company’s relationship with the customer in a way that better maps to the customer’s ultimate objective. We think of customers as being on “journeys”—or missions to do or accomplish something. Journey edges refer to opportunities in which companies redefine their participation in the customer’s journey and expand their solution to encompass needs that either immediately precede or follow the core transaction. For example, when someone buys a flat-screen TV, he has to get it out of the box, assemble it, install it, and program it. Accordingly, options that wrap service around product, anything that turns “do it yourself” into “do it for me,” is a journey edge.

The third, enterprise edges, are the most challenging to find. The idea here is to exploit foundational assets in ways that were not foreseen when they were developed to support the core business. Somewhere in the stack of these assets, inadvertent value could be buried. Like other edges, the asset already exists, and the point is that under the right conditions, it can enable most of what is necessary to satisfy an unintended need elsewhere. As we hinted at with Toyota above, data is an intuitive example. Companies often collect rich data in the process of running their core operation that also happens to be valuable to other companies. As a consequence, it often takes only incremental investment to monetize this value by applying the data in another context.

Our view is that while edge opportunities are prevalent, companies do not maximize them. We suspect that this is due to a lack of awareness of the power that edges offer. Absent the right priorities and appropriate attention, it is hard to stumble on these opportunities by chance. The skill relies on recognizing patterns and asking the right questions. You almost need a kind of peripheral vision, a different way of looking at your company, its assets and offerings. We have seen many companies learn to develop this special kind of vision and questioning into what we call an “edge mindset”—truly a new way of strategic thinking that can lead to substantial opportunities for growth.

This post is excerpted from the Harvard Business Review Press book Edge Strategy: A New Mindset for Profitable Growth.

Alan Lewis is a managing director and partner in L.E.K. Consulting‘s Boston office. He is coauthor of Edge Strategy: A New Mindset for Profitable Growth (HBR Press 2016).

Dan McKone is a managing director and partner at L.E.K. Consulting and a member of L.E.K.’s Global Leadership Team. He is coauthor of Edge Strategy: A New Mindset for Profitable Growth (HBR Press 2016).