GE-McKinsey Nine-Box Matrix

In the 1970s and 1980s, a number of large firms operated multiple business units. GE was one of the prime examples of that type of business, and today one of the few remaining, successful firms active in a number of disparate sectors. The GE-McKinsey Nine-Box framework was developed in the 1970s to offer a systematic approach to evaluating different business units and make sure the firm as a whole pursues the right priorities. The problem with different business units is that their financial performance and projections may actually vary quite a bit, depending on asset intensity, competitiveness of markets, need for heavy R&D, etc. So to use a fixed set of financial metrics and hurdle rates across different businesses may well lead to the wrong decision.


The GE-McKinsey framework is somewhat similar to the BCG matrix. The key difference is that it takes into account multiple decision criteria and groups them into two broad categories. Rather than taking a single proxy for industry attractiveness (as the BCG matrix does with growth rates), the idea behind the framework is to take a series of indicators and develop an aggregate evaluation of whether the attractiveness of a given industry is high, medium or low. The same is true for business unit strength, where the BCG matrix uses market share as a proxy.

For industry attractiveness, key criteria would be:
– Market size
– Market growth rate
– Industry profitability
– Demand variability
– Degree of competitiveness or rivalry
– Macroeconomic factors
– Etc.
For business unit strength, one would include factors such as:
– Market share
– Changes in market share
– Profit margins relative to competition
– Production capacities
– Distribution channel access
– Brand equity
– Intellectual property
– Etc.

Behind each of these factors could be a number of very detailed analyses, and an overall rating would be derived by applying a certain weight for different factors.

The strategic implications derived from the framework are again fairly similar to the BCG matrix. They would typically be summarized in three broad recommendations:
– Grow
– Hold
– Harvest

In some ways, one can look at the GE-McKinsey Nine-Box Matrix as a forerunner of a variety of portfolio model, or of the “portfolio of initiatives” approach that McKinsey more recently focused on.