As a business strategist, consultant, manager, executive, or leader, you are always on the lookout for ways to improve your organization’s performance. One way to achieve that is by creating and executing an impactful business strategy.

Strategy as a field of study is very nascent in business studies. Though an old military concept, and on occasions referred to in politics and foreign diplomacy, a strategy wasn’t so native to the business world, until recently. Michael Porter, the management guru’s seminal paper on “How Competitive Forces Shape Strategy” (1979) changed that for good.

Since Porter’s Five-Forces Model, many strategic frameworks have emerged in business. Some stayed and others strayed away. We discuss here the ones that have dwelled on and made a huge difference for businesses.

Business Strategy Frameworks and Their Relevance

These time-endured business methods will add to your toolkit and give you a strong understanding to formulate and execute better business strategies. Choose a strategy framework that best fits your business needs.

1. GE-McKinsey Nine-Box Matrix

Developed by McKinsey & Company

Multi-business firms manage numerous business portfolios, sometimes ranging from 50 to 100 products and services. The breadth of these operations makes it very hard to decide on what to invest in and what to let go of given limited resources. The GE-McKinsey Nine-box matrix was developed to help companies make these decisions easier.

Goal: To prioritize investments in numerous business units.

Origins: In the 1970s, GE managed complex business portfolios comprising unrelated products and services. Until then they relied on future cash flow projections, market growth, and more to make investment decisions. Unsatisfied with the returns on investments, GE consulted with McKinsey and consequently, the Nine-Box Strategy Framework was born.

How it works?

In the 9-box matrix, opportunities are categorized as high, medium, and low on two axes of industry attractiveness and competitive strength.

Competitive strength is an internal variable that’s assessed by estimating market share, profitability, and brand perception of the product. Industry attractiveness is an external variable, which is assessed by estimating the rate of growth in the industry in question, the number of competitors, barriers to entry, and the industry’s profitability.

Used to:

• • Determine in which product or business unit to invest

• • Decide whether to Invest, Maintain, or Divest

• • Understand the performance of current investments

• • Identify the strategy to improve performance

Takeaway: Knowing when to retreat is much more important than basking in success.

2. The BCG Growth-Share Matrix

Developed by the Boston Consulting Group (BCG)

The BCG strategy matrix classifies products based on their growth potential. It’s a passive approach that determines what you should expect from a product.

Goal: To assess the relative strength of different product lines by profitability.

Origins: This is the first-ever portfolio management framework designed to prioritize investments for multi-business corporations. Created in 1968 by BCG founder, Bruce Henderson, in its prime, it was used by over half of Fortune 500 companies.

How it works?

In the growth-share matrix, products are categorized based on the “market share” of the product and overall “market growth.” Along these two axes, product lines are assigned to one of the 4 quadrants – Star, Cow, Question mark, and Dog. A star product has a high market share, and its market grows at high rates.

Market growth in the matrix is always relative and is considered about the economic growth rate. If the economy grows at 6%, and a market by 4%, we can conclude the market growth is low.

Used to:

• • Understand what to expect from a product

• • Stay focused on profitable products, and identify non-performers

• • Determine overall future direction

Takeaway: If you have a star product, don’t rush to release new versions.

3. Porter’s Five Forces

Developed by Michael E. Porter

Porter’s five forces shape every industry and market. They are an analysis tool to assess any market and determine the competition therein, and hence its profitability and attractiveness. It can be employed as a sub-part of other strategy frameworks to analyze the market you plan to enter or are already in.

Goal: To determine market viability

Origins: Harvard Business School professor, Michael E. Porter, developed the Five Forces Model in 1979. He postulated that industry structure triumphs individual firm behavior in determining success for an organization. The model has found widespread usage among firms to analyze external forces such as government policies, culture, competition, and more.

How it works?

The model outlines the five factors influencing profitability in a market. They are competitor rivalry, bargaining power of buyers, bargaining power of suppliers, threat of new entrants, and threat of substitute offerings.

A business strategist must ask each of these drivers the force they wield in the market. For instance, in the case of suppliers, how many suppliers are there, how difficult it is to negotiate with them, can you substitute suppliers, etc.

Used to:

• • Enter a new (and unknown) market

• • Launch a new product line in the existing market

• • Reassess current market position

Takeaway: Sometimes it’s better to have a mediocre product in a perfect market than a perfect product in the wrong market.

4. Core Competencies

Redefined by Bain & Company

The core competency framework helps companies find their deep proficiency and unique value propositions. It screens through the company’s collective learning and figures out the best way to improve core competency via better coordination across diverse production units, and multiple technologies.

Goal: To identify areas of deep proficiency that are hard for competitors to copy or procure

Origins: Many organizations and scholars have contributed to the development of this framework. The earliest ones were CK Prahalad, a professor of corporate strategy at the University of Michigan, and Gary Hamel, a lecturer at London Business School. It has been further refined by Bain and Company, and adopted in several industries including electronics, automotive, and others.

How it works?

According to Bain & Company, the litmus test of a Core Competency is whether it should be hard for competitors to copy or procure. To achieve that, isolate key abilities, compare them with others, understand what customers want, create a roadmap to hone and sustain them, and finally outsource/divest non-core capabilities.

Used to:

• • Make decisions on outsourcing, divestment, and partnering

• • Invent new markets (blue ocean)

• • Improve image and brand loyalty

• • Transfer of technology, knowledge, and skills across business units

Takeaway: Investing in strengths is always better than correcting weaknesses.

5. Balanced Scorecard

Developed by Robert Kaplan

It is used by businesses to take a top-level view of how they are doing. Over time it has become a widely used strategic tool in management.

Goal: Track company performance.

Origins: Harvard University professors, Robert Kaplan, and David Norton developed balanced scorecard model in 1992 to measure organizational performance. Initially, it was used only as a measure of short-term financial performance.

How it works?

Balance scorecard studies performance indicators typically grouped into four perspectives – financial, customer, process, and innovation.

Different indicators can be used based on the type of business. For instance, a restaurant will have different factors of success than an automotive company. The KPIs under these factors are usually compared with pre-determined objectives.

Used to:

• • Evaluate a business strategy

• • Translate long-term targets into achievable objectives and KPIs

• • Spot troubles in financial statements before they appear

• • Compare performance

• • Facilitate organizational change

• • Resource reallocation

Takeaway: Converting intangibles into tangibles makes assessment so much easier.

Does Your Business Strategy Work?

While the need for skilled business strategists is growing. According to LinkedIn, in the landscape of 2024, strategic advisors navigate a complex array of challenges, with their roles evolving at an unprecedented pace. The rapid acceleration of change, exemplified by a notable 33% increase in the past year, has broadened the strategic advisor’s responsibilities. They are now required to possess a nuanced comprehension not only of markets and economies but also of geopolitics, climate change, and broader societal impacts.

What professionals need to make an informed assessment of business position, pricing, and product-market fit is a knowledge of the right tools. Delving into strategy frameworks can take them close to their goals, and will help them:

• • Scientifically analyze a situation,

• • Structure thoughts,

• • Better communicate the recommendations, and

• • Shift perspective to offer advanced insights.