Playbook
Which of Our Businesses Deserve the Cash?
For the owner of more than one business, or one business with several lines, a sequence that stops the money going where it always went: test what holds the pieces together, map where cash is generated and where it is absorbed, rate each on its own merits, then decide deliberately how much of today's earnings fund tomorrow's options.
More than one business under one roof is more common than it looks. A consultancy with a training arm and a product. A manufacturer with a service line that grew out of warranty work. A firm with three regional offices that behave like three firms. The owner usually runs them as one, which means the cash goes where it has always gone, and where it has always gone is whichever part shouts loudest or was there first. The hard question is not which business is best. It is which deserves the next pound, and that is a different question with a different answer, because the best business may already have all the cash it can use and the weakest may be the one with a future. This sequence asks first whether there is any reason for the pieces to share a roof at all, then maps the money honestly, then judges each piece on its merits, and finishes with the question that owners put off longest: how much of today are you willing to spend on tomorrow.
Strategy & competition
Core Competence Analysis
For testing what your organisation is genuinely good at: the capabilities that open many markets, matter to customers and resist copying. Leave it alone when you are a young single-product company; you are still acquiring competences. Instead Lean Canvas, with cheap experiments behind it; you are still finding out what you are good at.
Start by asking what, if anything, the businesses share that a competitor could not easily copy: a capability that opens more than one market and that customers would notice if it went. If there is one, the portfolio has a logic and the cash question has a frame. If there is not, you are a holding company by accident, and the honest options include selling a piece. Either answer is useful; what is not useful is assuming the roof means something.
Watch forMistaking a shared owner for a shared competence. "They are all mine" is a fact about you, not about the businesses.
Strategy & competition
BCG Growth-Share Matrix
For deciding where a portfolio's cash should go, by plotting each business on market growth and market share. Leave it alone when you are one business in one market; there is no portfolio to balance. Instead Porter's Five Forces on the one business you have; a portfolio tool with one entry has nothing to say.
Now map the money. Plot each business by how fast its market is growing and how strong its share, and the grid tells you crudely but usefully where cash is generated and where it is absorbed. The cash cow pays for the question marks; the stars need feeding; the dogs are kept for reasons that are rarely written down. It is a sketch, two numbers per business, and its value is that it makes the current flow of cash visible, which in most portfolios it has never been.
Watch forTreating the four labels as verdicts. A dog can be the business that keeps the key customer; the grid starts the argument, it does not end it.
Strategy & competition
GE–McKinsey Nine-Box Matrix
For deciding which business units to invest in, hold or exit, by rating each on how attractive its industry is and how strong it is in it. Leave it alone when you manage one business; there is nothing to compare. Instead Porter's Five Forces on the one business; a nine-box with one unit in it compares nothing.
With the sketch done, judge properly. Rate each business on how attractive its industry is and how strong its position in it, using the several factors that actually matter rather than the two the sketch used, and the nine cells give a posture for each: invest and grow, hold selectively, harvest or exit. This is where the decision gets made, and where history gets its say taken away: a business is rated on where it stands and where its market is going, not on how long it has been part of the family.
Watch forWeights set to flatter a favourite. Agree the factors and their weights before anyone rates a business, as you would for any decision matrix.
Strategy & competition
Three Horizons
For managing today's core, tomorrow's growing businesses and the day after's options at the same time, so the present does not starve the future. Leave it alone when disruption arrives at software speed; scheduling the future for later is how incumbents get blindsided. Instead Build-Measure-Learn now; where disruption arrives at software speed, Horizon 3 cannot wait its turn.
Finally, set the balance over time. The core that earns today, the businesses that could earn in two or three years, and the options that might matter in five: all three need attention at once, and the usual failure is that the first quietly starves the other two, because this quarter's numbers are always more urgent than the ones that have not arrived. Decide, as a number, what share of cash and of your own time goes to each horizon this year, and write it down where the monthly meeting will see it.
Watch forHorizon three treated as something you can schedule for later. In a market that moves at software speed, later is how incumbents get blindsided.
In the end
You should end knowing whether the pieces belong together, where the cash actually flows, which business deserves the next pound on its merits, and how much of this year you have chosen to invest in the years after it. The answer may be to feed the business you like least, or to sell the one you built first. Owners find both hard, which is why the sequence is written down: so the decision rests on the four maps, and not on the Tuesday you happened to make it.