The Core-Growth Matrix

By: |Published on: Mar 8, 2012|Categories: Strategy|

Leading and managing a modern business is a relentless, often complicated task. Dealing with new competitors, shifting customer tastes, technological transformations and underlying economic swings can test even the very best leaders.

At its heart, however, the job is simple. In fact there are really only two questions that you and your executive colleagues should be asking:

  1. How strong is your core business and how are you ensuring that it becomes or remains advantaged?
  2. How compelling are your new growth opportunities, and how are you successfully exploiting them?

Your answers to these two questions can be plotted on the matrix, which I’ve called the Core-Growth Matrix. There are four possible positions for your business:

  1. Reverse The Decline. Companies in this quadrant have neither a strong core business nor a compelling set of new growth opportunities. There are two broad options for managers of businesses in this quadrant: (1) Reposition the core and take the necessary, and sometimes painful steps to halt the decline so that it has a better chance of building a stronger core business, albeit often from a smaller base; or (2) Managed decline, which, although unlikely to be most executives’ #1 choice, avoids the temptation of throwing good money after bad.
  2. Leverage The Core. These businesses have a strong core business but have been unsuccessful in identifying and creating new growth opportunities. The risk for these organisations is that changes in their markets will weaken their core business and they will slide from Quadrant 2 to Quadrant 1. The key to success is to understand the underlying capabilities that drive the current success of your core business and determine how you can best exploit them to allow you to generate new value for customers and new revenue streams.
  3. Strengthen Or Jump. Companies in this quadrant have compelling new growth opportunities but a core business that is in decline. As a result, their leaders have a choice: strengthen the core business or jump to a new core business. The decision rests on management’s assessment of the fundamentals of the core business and the markets in which it operates. Where the market is still attractive and the company has potential advantages, strengthening the core is likely to be the best option, but in situations where you have become disadvantaged in an unattractive market, jumping to a new core business may be the best strategy.
  4. Extend Your Lead. All companies want to be in Quadrant 4, running a vibrant core business and developing exciting new avenues to growth. But this is no time to stand still. As I’ve written before, nothing fails like success, and in today’s fast-changing markets it is essential that winners continue to innovate, develop and evolve.

So, where is your company on the matrix, and what steps do you need to take to improve your current position?

© Stuart Cross 2012. All rights reserved.