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Quote: Bruce Henderson, BCG Founder

Quote: Bruce Henderson, BCG Founder

“All strategy depends on competition.” – Bruce Henderson, BCG Founder

Bruce Doolin Henderson, born on April 30, 1915, in Nashville, Tennessee, was an influential figure in the field of business strategy. After studying mechanical engineering at Vanderbilt University, he attended Harvard Business School but left before completing his degree. Henderson’s career began at Westinghouse Corporation, where he worked for 18 years, eventually becoming a vice president. In 1963, he founded the Boston Consulting Group (BCG), which grew into a leading management consulting firm under his leadership.

Henderson’s strategic philosophy was deeply rooted in the concept of competition. He believed that the essence of a successful strategy lies in understanding and leveraging the differences between competitors, leading to distinct behaviors and outcomes. This perspective is encapsulated in his assertion: “The essential element of successful strategy is that it derives its success from the differences between competitors with a consequent difference in their behavior.”

One of Henderson’s notable contributions is the “Rule of Three and Four,” which posits that a stable, competitive industry typically has no more than three significant competitors, with market shares in a 4:2:1 ratio. This hypothesis underscores his belief in the natural equilibrium of competitive markets and the importance of strategic positioning within them.

Henderson’s ideas have been referenced and built upon by various business leaders and scholars. His emphasis on competition as the cornerstone of strategy has influenced contemporary strategic thinking, highlighting the necessity for businesses to understand their competitive landscape and to develop strategies that capitalize on their unique strengths and market positions.

In summary, Bruce Henderson’s strategic insights, particularly his focus on competition, have left a lasting impact on the field of business strategy, emphasizing the need for companies to differentiate themselves and strategically navigate their competitive environments.

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Strategy Tools: The Growth-Share Matrix

Strategy Tools: The Growth-Share Matrix

The Growth-Share Matrix was introduced almost 50 years ago by Bruce Henderson and the Boston Consulting Group (BCG). It is considered one of the most iconic strategic planning techniques.

The Growth-Share Matrix is a framework first developed in the 1960s to help companies think about the priority (and resources) that they should give to their different businesses. At the height of its success, in the late 1970s and early 1980s, the Growth-Share Matrix (or approaches based on it) was used by about half of all Fortune 500 companies, according to estimates.

The Growth-Share Matrix

The need which prompted The Growth-Share idea was, indeed, that of managing cash-flow. It was reasoned that one of the main indicators of cash generation was relative market share, and one which pointed to cash usage was that of market growth rate:

“To be successful, a company should have a portfolio of products with different growth rates and different market shares. The portfolio composition is a function of the balance between cash flows. High growth products require cash inputs to grow. Low growth products should generate excess cash. Both kinds are needed simultaneously.”—Bruce Henderson.

The two axes of the matrix are relative market share (or the ability to generate cash) and growth (or the need for cash).

For each product or service, the “area” of the circle represents the value of its sales. The growth–share matrix thus offers a “map” of the organization’s product (or service) strengths and weaknesses, at least in terms of current profitability, as well as the likely cashflows.

The matrix puts each of a firm’s businesses into one of four categories. The categories were all given memorable names – cash cow, star, dog and question mark – which helped to push them into the collective consciousness of managers all over the world.

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Global Advisors | Quantified Strategy Consulting