Work it through: 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.
Seven steps, in the order the playbook gives them. Your work stays in this browser until you save it to a file.
Your ducks
Start with what the people believe, what the paperwork says and what actually happens. The issues where your ducks disagree are the ones to carry into the homework.
You have not filled in the ducks sheet yet.
The homework
What has to be found before any of the four frameworks is worth running. Put a name and a date against each one, and tick it when you have it in your hands.
The ducks
For Core Competence Analysis
For BCG Growth-Share Matrix
For GE–McKinsey Nine-Box Matrix
For Three Horizons
Step 1 of 4: Core Competence Analysis
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.
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What comes out, and how to read it
A short list of genuine core competences, often between zero and three when the tests are honestly applied, together with the core products that embody them and an agenda for investing in, protecting and reusing them across markets.
- Surviving all three tests is rare by design. Prahalad and Hamel doubted any company could lead in more than five or six competences; a long list means the bar was set at 'things we do' rather than 'things that pass the tests'.
- A candidate that fails one test is information. Failing market access leaves a niche capability to exploit where it stands; failing imitability leaves a cost of entry, with a countdown until rivals catch up.
- Read the result at corporate level. The article's target was the tyranny of the strategic business unit, which optimises end products while starving the shared competences beneath them.
Step 2 of 4: BCG Growth-Share Matrix
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.
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Step 3 of 4: GE–McKinsey Nine-Box Matrix
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.
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What comes out, and how to read it
A picture of the whole portfolio on two axes, a cell placement and investment prescription for each unit, and a capital allocation argument grounded in explicit criteria. The canonical form is a 3x3 grid with industry attractiveness on one axis and business strength on the other, and that is how this entry is drawn, the nine cells resolving into three diagonal investment zones.
- Read the three diagonal zones before the nine cells: above the diagonal invest and grow, on it be selective, below it harvest or divest.
- Treat cell placements as hypotheses resting on weighted scores. If a placement flips when the weights move a little, the placement is an opinion wearing a chart.
- Compare the prescriptions against actual capital flows. The gap between where the matrix says money should go and where it currently goes is the review's real finding.
Step 4 of 4: Three Horizons
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.
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What comes out, and how to read it
A one-page portfolio view showing which businesses occupy each horizon, where the gaps and imbalances sit, and a governance agenda: what to defend, what to scale, what to seed, and how each will be measured.
- Read the horizons as concurrent, never sequential. The book's central instruction is to manage all three at once; a plan that treats them as phases has deferred the future indefinitely.
- Look for the empty horizon. A dominant Horizon 1 with a thin Horizon 2 is a stall in the making, visible years before the revenue line shows it.
- Check that metrics and managers differ by horizon. A Horizon 3 seed judged on this year's margin is being quietly executed, whatever the strategy document says.
The review date
Set the date you will come back and ask whether it worked. Put it in your diary; this site will not remind you.
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