Way, way back (in the early 70s I think 🙂 ) some people much smarter than us at BCG (Boston Consulting Group) came up with a business concept so sharp, so insightful, so predictive of business success that virtually every CEO they pitched it to hated it. So BCG quietly dropped the concept and will hardly even take credit for its invention today.
Since we are contrarian by nature, this story alone attracted us to the concept. But the more we studied it, the greater our belief in it became. The more we followed it, the greater our successes became. Thank you Richard Koch and Perry Marshall for sharing this concept with us!
First, DO NOT let its simplicity keep you from seeing the implications in your business and your entire market.
Second, we believe this lens is so predictive that we only work with clients that want to build a star business. Most businesses are not stars — however, many can be re-engineered as stars.
So What is a Star business?
A star business has just 2 qualifiers;
1) it’s in a market that’s growing at least 10%/yr
2) it is the leader in that market
The BCG matrix basically puts all businesses into 1 of 4 categories. Stars, Question Marks, Cash Cows & Dogs.
Stars — Stars are the leader in a high growth market. While they typically consume large amounts of capital, they will always pay huge dividends as the market cools and they become cash cows.
Cash Cows — Cash cows have a high market share in a mature low growth market. They generate much more revenue than they consume and [at least] some of that revenue should be used looking for their next star.
Question Marks — Question marks are in a fast-growing market, but are not the leader. They should be looking for ways to become the leader; think merger, buying customers, pivot, serve a smaller part of the market, etc, etc
Dogs — Dogs are in a low growth market -and- they aren’t the leader. They should be sold or optimized for profits until they die out.