You probably know and have used the Risk vs. Reward matrix, which creates four quadrants defined by low risk vs. high risk and low reward vs. high reward. It’s a very useful first step in prioritizing new ventures. Everybody wants to find the low risk / high reward possibilities, but they’re rare. Low risk low reward seems like where you want to run your business, with the occasional moonshot thrown in.
A slight modification of that matrix would be Effort vs. Reward, where low effort and high reward is seen as low-hanging fruit.
Those are great, but today I’m going to show you 4 more 2 by 2 matrices that you might want to add to your toolbox.
The first is the Eisenhower Matrix of urgent vs. important, which divides tasks into never mind, schedule, delegate, and do it now. Every executive should have this matrix front and center in their daily thinking.
Next is the Ansoff Matrix, which looks at the role of your product portfolio in existing and new markets with new and existing products. This matrix provides a framework for exploring growth strategies and balancing your portfolio.
The Kraljic Matrix sets supply risk against profit impact and helps companies maximize supply security and minimize supply risk.
- Strategic items are critical to the business’s operations, but are often limited or subject to high risk, such as relying on a single supplier.
- Bottleneck items don’t significantly impact profit, but can cause operational disruptions. These have to be managed to create a secure supply.
- Leverage items are easy to source and have significant profit potential and for that reason there’s a lot of competition. These need to be continually monitored and optimized.
- Non critical items should be automated as much as possible.
The last is the Boston Consulting Group’s Growth-Share Matrix, which identifies where to allocate resources by categorizing business units or products into four quadrants.
- Stars have potential to generate significant revenue but also require significant investment. For stars, focus on growth, innovation, expanded market reach, and performance.
- Cash cows generate strong, steady cash flow with minimal investment. Maximize the profitability of your cash cows to fund other opportunities.
- Question marks have potential, but require a lot of work. Invest selectively in question marks and be prepared to get out quickly if they don’t look like they are becoming stars.
- Dogs are ready for the trash bin unless you reposition them into successful niche products.
