2.4
BCG Growth-Share Matrix
A 2×2 that sorts products into stars, cash cows, question marks and dogs by market growth and relative market share, with an investment instruction attached to each cell.
Bruce Henderson, Boston Consulting Group (1970)
What it does
Puts a whole portfolio on one page and forces a funding decision for every line instead of a rolling renewal of last year's budget. It also states its assumption out loud: relative share drives cost position and therefore cash generation. That is more than most portfolio reviews manage.
When it breaks
It measurably worsens the decision it is used for. The damage comes from the cell labels rather than the axes: 'dog' carries a divestment instruction that the numbers inside the cell do not, and once a product has been placed there nobody re-reads the arithmetic. Market growth is also a poor proxy for attractiveness in any category where a shrinking market is consolidating into a profitable one.
Case
Armstrong and Brodie ran 27 experiments in six countries over five years. 1,015 subjects, acting as managers, chose between an investment that clearly doubled the money and one that clearly halved it. Of the subjects shown the BCG matrix, 64% chose the unprofitable investment; of those who used the matrix in their analysis, 87% did.
Armstrong & Brodie · Effects of Portfolio Planning Methods on Decision Making, IJRM (1994) ↗In the wild
Unchecked · not part of the tier
What people have written about this tool in the last twelve months. A machine found these and nobody has read them. Everything above this line was checked by hand.
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