── ── Cognitive bias

BCG Growth-Share Matrix

Maps each business unit on a 2×2 grid of market growth rate vs. relative market share, revealing which units generate cash, which absorb it, and which to invest in, harvest, or exit. Four quadrants: Stars (invest), Cash Cows (harvest), Question Marks (binary decide), Dogs (exit or hold minimally). Rests on two empirical anchors: experience curve (high share = lowest cost)…

How it works

Produce a Portfolio Map — quadrant assignments, trend arrows, and resource-allocation recommendations per SBU.

Step 1 — Define SBUs. Must: serve an identifiable customer group, have identifiable competitors, be manageable with resource independence. Stop rule: if you cannot name the primary competitor, the boundary is wrong.

Step 2 — Market growth rate. 2–3 years external data; calculate CAGR. Dividing line: 10% (raise to 20–30% for AI/clean-tech). Never use own revenue growth as a proxy.

When to use it

• user says "portfolio review," "cash cow," "Stars and Dogs," "growth-share matrix," "which business should we fund," or "resource allocation across units"
• firm has multiple business units competing for shared capital
• investor or board discussion needs a visual portfolio health read

Worked example

General Electric's "Fix, Sell, or Close" Portfolio Pruning (1981–1995)

When Jack Welch became CEO in April 1981, General Electric was the archetypal diversified conglomerate: dozens of strategic business units — a structure GE itself had pioneered in its 1970 reorganization — spanning lighting, appliances, motors, power systems, aerospace, mining, housewares, and consumer electronics. The company was profitable in aggregate, but shared capital was spread across hundreds of product lines regardless of competitive position. Welch's response was an operational enactment of growth-share portfolio logic.

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