I keep a slightly modified version of the BCG Growth Share Matrix tacked up by my desk, right next to my Growth Marketing Cheat Sheet. It's 53 years old but still an incredibly valuable tool for analyzing modern companies in the right situations.
The matrix is a simple 2x2 with market growth rate (high vs low) on one axis and market share (high vs low) on another. The four categories companies can fall in are Dogs, Cash Cows, Question Marks and Stars. Dogs are small market growth rate, small market share. Cash Cows are high market share, low market growth rate. Question Marks are high market growth rate, low market share. And finally Stars are high market growth rate, high market share.
BCG, and later Bain, introduced the growth-share matrix to large conglomerate product manufacturing companies in the early 1970s and helped many of them improve performance by following a simple path...invest in the Stars. Divest the Dogs. Milk the Cash Cows. Be wary of the Question Marks.
For over half a century, both practitioners and academics have extensively scrutinized the BCG Growth Share Matrix and it has many flaws to be sure, but I find it to be frequently useful in my work. Many VCs certainly use a version of this in placing their bets as well. It is helpful for me in thinking about what companies I work with, and could be useful for full time employees looking at job opportunities.
Is the company you are looking at in a category that is growing? How fast is it growing? Several companies I have worked with over the years were great companies, but not in categories that were growing quickly.
Does the company you are looking at have a shot at being the market leader? Or are there multiple 800lb gorillas already there? In the software world there are booms and busts, and many are quick to jump into trends with companies where it is unlikely they will be able to be the market leader. The purveyors of the BCG Growth Share Matrix would argue to give yourself a shot! Work for a company that has a chance of being the market leader.
Take the generative AI market right now...there is one clear Star (OpenAI/ChatGPT), lots of gorillas lurking (Google, Amazon, etc.) and a whole lot of Question Mark companies trying to get in the mix. If you were to use the BCG Growth Share Matrix and apply it to generative AI, you would likely conclude if you were going to make a move, going to a smaller upstart generative AI company would be risky, and OpenAI/ChatGTP would be the safest bet.
Consider companies like Uber, Doordash, Zillow, Stripe, and Google; analyzing their trajectories through the lens of the BCG matrix reveals that they were always, or evolved into, 'Stars' - market leaders in rapidly growing categories.
Today I use the BCG Growth Scale Matrix to help me decide which companies I should work with. I wish I learned about it earlier! In hindsight I have spent a lot of time at potential Stars, but I have also put in significant time with Cash Cows, Question Marks and Dogs.
The brilliant Richard Koch, champion of the 80/20 principle, accredits a lot of his investing success to the Star principle. His ethos is to go all-in when you find a Star, and it has served him very well.
I hope it is useful for you as well and please let me know at rob@growthish.com how I could think about this in a better way. And as always if you know of other unique growth marketing tools or service providers I should investigate, please send them my way.