From the 1970’s and 80’s, ½ of Fortune 500 companies used this to manage their portfolio of products, R&D investments, and business units.
There are two primary factors and drivers:
- company competitiveness (market share), and
- market attractiveness (growth rate).
- Cash Cow = low growth/high share
- Stars = high share / high growth
- Question Marks = high growth / low share (should be invested or discarded)
- Pets = low share / low growth (should be liquidated/divested/repositioned)
Caution: market share is not a predictor of sustained performance (i.e. blackberry). The probability that a share leader is also a profit leader has decreased from .5 in 1950 to almost 0 today (Source: BCG).
If we apply this matrix today to Google, their “cash cows” are AdWords and AdSense, where 90% of their revenue comes from. Their “star” is rapidly growing Android, and their “question marks” are Glass and driverless car.
What question mark should you invest? Discard?
