1. They are more sophisticated than the simple growth/share boxes whose mis-use did so much damage in the past. Business units’ relatedness gets looked at, as does risk assessment. Michael Mirow, former head of Strategy at Siemens and now with Decision Institute, gave a great explanation of how his former firm uses matrix assessment for investment/disinvestment decisions.
2. The matrices are not used for performance management purposes, as was common in the 70s, being limited to investment choices and also for external explanation of corporate strategy.

I guess what we see released publicly by matrix users may look pretty simplistic, but this early report suggests there’s some sophisticated thinking and analysis going on behind the scenes. Keep an eye out for a more comprehensive report from BCG.

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.