The Psychology of Quality and More
The GE Portfolio Matrix
A common problem when displaying data is how to get more than two variables onto a two-dimensional page. The Cartesian X-Y graph format is splendid for many situations, but when you want to display multiple variables then it gets a bit tricky. Here’s an example of how it can be done, as used by General Electric. The tool itself is interesting, but perhaps more useful for general use is to notice how it uses other devices for displaying additional variables beyond the x-y dimensions.
The basic purpose of the GE Portfolio Matrix (also called the GE-McKinsey Matrix) is analysis of multiple business units, with a view to deciding where to place internal investments. This method assesses each business unit for (a) how attractive its target market is, and (b) how competitive the business is in that market. The basic matrix used is as below.
One of the methods used here to assess multiple variables is to apply combination metrics. Thus ‘market attractiveness’ is a combination of factors such as market size, growth rate, profitability and so on. How the factors are combined into a single High/Medium/Low assessment is a bit of a black art, but should reflect the relative importance of each factor. The ‘competitive strength’ of the business unit is likewise a combination measure, including such as market share, customer loyalty and control of distribution channels.
The simplest method of positioning the business unit on the chart is to simply add and ‘X’ and the name of the unit. A method that can be used to show critical sub-variables is to show each unit as a pie chart, with the size of the overall chart reflecting such as market share and the segments indicating additional financial breakdown.
Further information could be added with such as arrows to show planned changes and the investment needed to create these shifts.
The GE Portfolio Matrix is useful in itself, both as a general business tool and for more quality-oriented activity, for example you could adapt it for identifying where to apply a quality improvement ‘investment’, focusing your people in the appropriate areas.
Next time: The Boston Matrix
This article first appeared in Quality World, the journal of the Chartered Quality Institute
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