How do you use a growth matrix to prioritize your resources and investments?

1 What is a growth matrix?

A growth matrix is a framework that maps your products or services along two dimensions: market attractiveness and competitive strength. Market attractiveness measures how attractive a market is for your business, based on factors such as size, growth, profitability, and customer needs. Competitive strength measures how well you perform in a market, based on factors such as market share, brand recognition, quality, and innovation. By plotting your products or services on a growth matrix, you can see how they compare to your competitors and where you have the most potential for growth.

2 How to create a growth matrix?

To create a growth matrix, you need to collect and analyze data on your products or services, your markets, and your competitors. You can use various sources of information, such as market research, customer feedback, sales data, and industry reports. You can also use your own judgment and experience to assess the market attractiveness and competitive strength of your products or services. Once you have the data, you can use a spreadsheet or a software tool to create a growth matrix. You can use a scale of 1 to 10, or low, medium, and high, to rate each product or service on each dimension. Then, you can plot them on a four-quadrant matrix, as shown below.

3 How to interpret a growth matrix?

A growth matrix can help you identify four types of products or services, based on their position on the matrix. Stars are products or services that have high market attractiveness and high competitive strength, and are the leaders in their markets with strong growth potential. Question marks have high market attractiveness but low competitive strength, and are in fast-growing markets but face strong competition. Cash cows have low market attractiveness but high competitive strength, and are in mature or declining markets but have a loyal customer base and generate steady cash flow. Dogs have low market attractiveness and low competitive strength, and are in unattractive markets with weak performance. You should invest in stars to maintain or increase your competitive advantage and market share, evaluate question marks carefully, maintain cash cows and use the cash they generate to fund your growth initiatives, and consider divesting or phasing out dogs as they may drain your resources and distract you from your core business.

4 How to use a growth matrix for strategic decisions?

A growth matrix can be a useful tool for making strategic decisions about your products or services. It can help you decide which products or services to invest in, develop, or launch, based on their growth potential and competitive advantage. Additionally, it can help you determine which products or services to divest, discontinue, or outsource, based on their profitability and strategic fit. Furthermore, it can help you decide which markets to enter, exit, or expand, based on their attractiveness and your capabilities. Finally, it can help you decide which competitors to target, avoid, or partner with, based on their strengths and weaknesses.

5 How to update and refine your growth matrix?

A growth matrix is not a static tool, but a dynamic one that reflects the changes in your business environment and your strategic goals. You should update and refine your growth matrix regularly, based on new data, feedback, and insights. You should also monitor the performance of your products or services, and track their movement on the matrix. You should be prepared to adjust your strategy and actions accordingly, as your products or services may shift from one quadrant to another over time.