Framework library · Growth strategy
GE-McKinsey nine-box matrix
The nine-box matrix rates each business on two composite scores: how attractive its industry is (built from factors such as size, growth, margins and rivalry) and how strong the business is within it (built from share, cost position, technology and customer relationships). Units above the diagonal are candidates for investment, those on it for selective investment, and those below it for harvesting or sale.
Use it when
- You run several business units and need to decide where the next round of capital goes.
- Market growth and share alone, as in the BCG matrix, miss what makes your industries attractive, such as margins, regulation or capital intensity.
- Unit heads each argue for investment and you need a common, explicit basis for comparing them.
Avoid it when
- The units share so many costs or customers that they cannot be scored separately.
- You need a precise answer. The scores are judgements. The matrix frames the debate, and a business case for each unit settles it.
- There is only one business. Use a growth tool such as the Ansoff matrix or Three Horizons.
How to run it
Choose and weight the attractiveness factors
Four to six that matter in your industries, such as market size, growth, average margin, intensity of rivalry, capital intensity and regulatory risk.
Choose and weight the strength factors
Four to six for each unit against its rivals, such as relative share, cost position, technology, brand and customer relationships.
Score each unit from 1 to 9 on both
Score each factor, apply the weights and enter the composite. Score each industry the same way whichever unit is in it, so units can be compared.
Plot with market size as the bubble
The thirds of each axis give nine cells. The three at the top left are grow and invest, the diagonal is selectivity, and the three at the bottom right are harvest or divest.
Note where each unit is heading
Judge how attractiveness and strength will move over three years if nothing changes. A unit drifting down needs a decision now.
Turn the positions into capital choices
Invest to build, invest selectively, hold, harvest or sell. Then test each choice against that unit's own numbers.
Work through it
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Mistakes to avoid
- Letting each head score their own unit without challenge. Scores drift up. Calibrate them across units in one session.
- Choosing the factors after seeing the scores, which turns the matrix into a justification.
- Reading the cells as verdicts. A harvest unit may fund the rest of the group, and a selectivity unit needs a clear choice rather than a little of everything.
- Using it once. Industries change, and a yearly re-score shows which way each unit is moving.
Where it comes from
Developed in the early 1970s by McKinsey & Company and General Electric for allocating investment across a portfolio of business units, following the Boston Consulting Group's growth-share matrix. McKinsey describes it in "Enduring Ideas: The GE-McKinsey nine-box matrix", McKinsey Quarterly, September 2008. Source.
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