Thanks to Andrew Warren-Payne for pointing me at this work by Boston Consulting Group revisiting their classic growth share matrix. The matrix, originated by BCG founder Bruce Henderson 40 years ago, famously plots a product portfolio on a 2 x 2 against growth rate and market share, giving us categorisations like 'stars', 'problem child' (or 'question marks'), 'Dogs' and 'Cash Cows', and is a key part of business school teaching on strategy.
Many large organisations have used its principles of mapping company competitiveness (share) against market attractiveness (growth) as the basis for investment and resourcing decisions. High share could result in sustainably superior returns and eventually cost-efficiences driven by scale and experience, high growth indicated markets with the greatest leadership potential.
In the face of rapid change and uncertainty driven by (amongst other factors) technological impact, BCG now say that companies need to 'constantly renew their advantage, increasing the speed at which they shift resources among products and business units'. In addition, market share is no longer a direct predictor of sustained performance, with competitive advantage increasingly coming from other factors such as adaptability. Sounds a lot like agile strategy.
Their research which mapped every US listed company to a quadrant on the matrix found that companies circulated through the matrix quadrants faster than in previous years (comparing a five year period 2008-2012 to one from 1988-1992). In fact looking at some of the largest conglomerates, the average time any business unit spent in a quadrant was less than two years in 2012 (with only a few exceptionally stable industries seeing fewer disruptions).
There were also changes in the distribution of companies across the matrix, and a breakdown in the relationship between relative market share and sustained competitiveness. Cash cows generated a smaller share of total profits (25% lower than in 1982), and were proportionately fewer, with the life span of this stage declining (by some 55% in industries that saw faster matrix circulation).
Unsurprisingly BCG go on to say that the matrix is still relevant, but needs to be applied with greater agility and a focus on 'strategic experimentation' to allow greater adaptability. This is likely to mean more experimentation in the question marks quadrant, run more quickly, economically and systematically in order to identify promising ones that can grow into stars. It's also likely to mean faster response to cashing out stars, retiring cows and maximising what value they can from pets. All of which sounds a lot like a 70,20,10 approach. But fascinating nonetheless.
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