Good old tools still help

You would expect knowledge in a professional field to accumulate – what we use today being built on what was known and used in the past. Strategy often doesn’t feel like that – a new fad gets promoted, then falls away as the next one comes along. So it’s a good reminder that one such tool is still helpful – if used with very great care!

The GE-McKinsey nine-box matrix helps identify which business units in a corporate entity should receive more/less investment or divestment. It emerged at a time when corporate strategy was heavily oriented to a ‘portfolio’ view, so it has its limitations – it does not deal well [or at all really] with the synergies between related businesses, and its assessment of ‘industry attractiveness’ and ‘competitive advantage’ were pretty flakey – not much change there then! It’s worth remembering that virtually all the huge conglomerates built during the 60s and 70s on the portfolio view of corporate strategy have now been broken up .. so use it very carefully, and only as part of a more integrated assessment of related businesses.

At least this tool wasn’t as down-right dangerous as the BCG growth-share matrix though – I’m told that a senior partner at BCG has made a public apology for the massive destruction of corporate value that arose from that one .. anyone know when/where that apology was made?  Just shows how careful you have to be about even solid theory-based approaches – there’s not much wrong with BCG’s underlying reasoning .. it’s just useless – no, very very dangerous – when badly applied.

… and of course, none of these types of tool say anything at all about how strategy and performance get built over time.

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