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Using a matrix to frame decisions and represent data – or, an ode to the four-box grid

Updated: Nov 6, 2023

Most of us have probably at some point written a list of the pros and cons, or advantages and disadvantages, of a particular decision in our professional lives. Perhaps you’ve even written one for a personal choice – like Charles Darwin, who in 1838 created a list of the pros and cons of marriage, concluding in the end that the pros outweighed such disadvantages as having less money for books or perhaps not being able to live in London.

Sometimes however, we need to frame a more complicated set of choices or other data, and one dimension is not sufficient. That is where the consultant’s favourite decision-making tool comes in, the matrix, or four box grid. Years of conditioning as a strategy consultant mean that I get (too much?) satisfaction from untangling a problem onto the skeleton of a matrix or grid, but for many people it represents a simple and elegant approach to communicating something complex.

The four-box grid (or in consultant shorthand, the 2x2 grid) can be applied in many different situations. For example, I’ve recently covered the Important vs Urgent matrix, or Eisenhower matrix, that I use to separate out those tasks which are important but not urgent in a business context. I also frequently use a 2x2 grid to compare strategic initiatives, perhaps in terms of impact and effort. You can also sometimes add a third dimension where the size of ‘bubble’ or shape on the grid is used to denote the size of an opportunity (e.g., profit potential) or another quantitative variable.

Let’s talk about three of the most well-known four-box examples that you can use in your own decision making.

What is an Ansoff Matrix?

The Ansoff Matrix, also known as the Product/Market Expansion Grid, is a strategic management tool used to visualise and evaluate potential growth strategies for a business. Developed by management theorist H. Igor Ansoff in 1957, it presents four growth options based on the new dimensions of (i) products (new and existing) and (ii) markets, or customers (new and existing):

  1. Market Penetration: This focuses on selling existing products in existing markets. The aim is to increase market share, achieved through strategies like pricing, promotions, or increased distribution/marketing activity.

  2. Product Development: Here, companies introduce new products to existing markets. This involves innovation, research and development, and often requires understanding customer needs to introduce products they'll adopt.

  3. Market Development: This entails selling existing products in new markets. Strategies can include entering new geographic territories, targeting new customer segments, or using different sales channels.

  4. Diversification: normally the riskiest strategy, diversification involves selling new products in new markets. This can be related (a similar field or technology) or unrelated (in effect a completely new business venture) to your core business.

Ansoff matrix

I find this matrix particularly useful when a business is considering focusing on customer acquisition vs driving cross-sell and up-sell to existing customers. In general, I’ve found it to be a more straightforward route to growth for mid-sized companies to focus on acquiring more customers (in existing markets or new markets) rather than trying to diversify their product offering and cross-sell.

What is a Boston matrix?

The Boston Matrix, also known as the Boston Consulting Group (BCG) Matrix, is a strategic tool used by companies to evaluate their product portfolios. Developed in the 1970s by the Boston Consulting Group, it categorises products based on the two dimensions of (i) their market growth rate and (ii) their market share relative to competitors. This matrix divides products (think business units or brands, or even countries) into four categories:

  1. Stars: These are high-growth, high-market-share products, and are leaders in expanding markets. They often generate more cash than they consume in their routine operations but may also require substantial investment to maintain their position over time as the market evolves.

  2. Cash Cows: Products in mature markets with high market share but low growth. They generate more cash than is reinvested, providing funds for other parts of the business. But beware - these businesses are ripe for disruption as competitors will be tempted into the market

  3. Question Marks (or Problem Children): These have low market share in high-growth markets. They often consume more cash than they generate, and their future is often uncertain. Strategic decisions must be made about whether to invest in them or divest.

  4. Dogs: Low market share in low-growth markets. They may generate enough cash to be self-sustaining but are generally considered for divestment.

Boston matrix

The Boston Matrix aids companies in allocating resources among products and deciding where to invest, maintain, or divest.

What about a SWOT analysis?

Possibly the most used four-box grid, a SWOT analysis is a strategic planning tool used to evaluate an organisation's Strengths, Weaknesses, Opportunities, and Threats. Strengths and Weaknesses are internal factors, reflecting a company's resources, capabilities, and internal processes. Opportunities and Threats, on the other hand, are external factors, emerging from the environment, competitors, or market trends.

This might be controversial, but I see very limited value in a SWOT analysis vs a simpler ‘Opportunities and Risks’ analysis, such as Darwin’s list. It is hard to create a SWOT analysis without some level of duplication between Strengths/Opportunities and Weaknesses/Threats – there is an inherent relationship between internal and external factors. For me, SWOT analyses are up there with pie charts as on balance hindering understanding and communication rather than helping.

When to use a matrix or four-box grid?

If you’ve not had occasion to use a matrix or four-box grid to date, then hopefully you’ve got a sense of how this simple tool can help you to frame a decision or clearly communicate a complex dataset, for example when you are:

  • Writing a 100-day plan (axes: impact vs effort)

  • Creating your business plan (axes: impact vs effort)

  • Creating your ideal client profile (axes: likelihood, likeability)

  • Comparing marketing channels (axes: ROI, headroom)

  • Evaluating your customer base for white space (axes: share of wallet, growth potential)

You don’t have to be a consultant to use it, and I’d recommend giving it a go!

If you’d like to discuss how you can make strategic decisions in your business, please Contact Us.

All views expressed in this post are the author's own and should not be relied upon for any reason. Clearly.



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