“We keep speed in mind with each new product we release…. And we continue to work on making it all go even faster…. We’re always looking for new places where we can make a difference.”
—Google’s company-philosophy statement
Given the rapid pace and unpredictable nature of change in today’s marketplace, the question arises: Has the matrix lost its value?
No, on the contrary. However, its significance has changed: it needs to be applied with greater speed and with more of a focus on strategic experimentation to allow adaptation to an increasingly unpredictable business environment. The matrix also requires a new measure of competitiveness to replace its horizontal axis now that market share is no longer a strong predictor of performance. Finally, the matrix needs to be embedded more deeply into organization behavior to facilitate its use for strategic experimentation.
Successful companies nowadays need to explore new products, markets, and business models more frequently to continuously renew their advantage through disciplined experimentation. They also need to do so more systematically to avoid wasting resources, a function the matrix has successfully fulfilled for decades. This new experimental approach requires companies to invest in more question marks, experiment with them in a quicker and more economical way than competitors, and systematically select promising ones to grow into stars. At the same time, companies need to be prepared to respond to changes in the marketplace, cashing out stars and retiring cows more quickly and maximizing the information value of pets.
Google is a prime example of such an experimental approach to portfolio management, as expressed in its mission statement: “Through innovation and iteration, we aim to take things that work well and improve upon them in unexpected ways.” Its portfolio is a balanced mixture of relatively mature businesses such as AdWords and AdSense, rapidly growing products such as Android, and more nascent ones such as Glass and the driverless car.
But at Google, portfolio management is not just a high-level analytical exercise. It is embedded in organizational capabilities that facilitate strategic experimentation. Google’s well-known exploratory culture ensures that a large number of ideas get generated. From these question marks, a few are selected, on the basis of rigorous and deep analytics. Subsequently, they are tried out on a restricted basis, before being scaled up.
Gmail and Glass, for instance, were launched among a select group of enthusiasts. Such early testing not only keeps costs per question mark down but also helps the company reduce the risk of new-product launches. After launch, Google leverages deep analytics to continuously monitor portfolio health and move products around the matrix. As a result, it is able to launch and divest approximately 10 to 15 projects every year.