The Boston Consulting Group Matrix is a useful way of viewing the stages of development of a product line.
It describes 4 phases of a product’s life cycle:
- QUESTION MARK: Low market share, high market growth
- RISING STAR: High market share, high market growth
- CASH COW: High market share, low market growth
- DOG: Low market share, low market growth
Originally developed to analyze cash flow, I’ve found it helpful to:
- Pin down a product line’s stage and where it may be going
- Choose product strategies
- Identify and allocate resources
When a product begins its life-cycle, it remains an unknown despite our best estimates about who will receive it and how it will be received. Product development is the most innovative at this stage: taking risks, learning on the fly and adapting rapidly. The focus of efforts is on developing PRODUCT KNOW HOW.
Some companies don’t manage this phase well, hoping to jump to the cash cow phase without making useful adjustments and improvements, or taking advantage of learning opportunities that arise during this time.
The product takes off: it’s starting to make money. Development still needs to be nimble and make creative decisions but now must stay within the product’s initial framework and identity (i.e., no crazy changes). This is an excellent time to promote the product line and establish the company’s expertise in the space. The focus is now on PROMOTING the KNOW HOW.
This is the pinnacle of the product line; it’s got a positive, steady cash flow. For some, it’s both the most boring and most desired phase of a product life cycle. Product development at this point is the most conservative and by-the-book. The focus is now on MAINTAINING the KNOW HOW.
The end phase for the product line. Sales are declining, market is compressing. This is the trickiest time for product development, since the options are now distinct and drastic: a simple make-over, major plastic surgery or a casket. The focus now is on WHAT TO DO with the KNOW HOW.
Some companies fail to recognize when the cow is dwindling into a dog. As a result, inappropriate product strategies are still maintained, hastening the eventual demise of the line and perhaps even, the company.