Transcend Strategy

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"What's your favorite 2 x 2?" is a question we receive frequently. But it is by no means the only one. Readers also want to know such things as: Why not use 3 x 3's ? The answer is that they aren't as helpful as 2 x 2's for our purposes. As Stephen Covey told us, "Important questions always get reduced to two options." A matrix with more cells may be useful for mapping the territory or analyzing decision criteria, but is too broad for crystallizing core issues. What's your method for analyzing dilemmas? Is there a taxonomy? The answer to that is yes, but it's lengthy. When we wrote the book The Power of the 2 x 2 Matrix we analyzed nearly 300 2 x 2 models, looking for underlying archetypes and patterns. We'll explore some of that methodology in a future article. But "what's your favorite" is still the champ. And, not surprisingly, we have a favorite, sort of. It's the Product/Market matrix, a 45-year old workhorse that Igor Ansoff sprang on the world in 1965. This tool is so effective because it cuts very closely to what we call the archetypal strategy dilemma"”the value proposition. As we say in the book, "The visible strategic act of corporate leaders is making choices that advance the goals of the firm in the best possible way." In the diagram, the archetypal dilemma is between Context and Value. Context is the way you go about the business"”the who, where, when, and why. Value is what you produce"”the what. How these issues are framed is the job of a leader. Ansoff's matrix is a product of the 1960s, when conglomerates were in fashion. Companies such as ITT, Litton, and TRW, owned businesses in a variety of industries. Sticking to the knitting, in Tom Peters memorable phrase, was not yet in vogue among the Fortune 500. Ansoff's experience with diversification helped him propose a simple taxonomy of strategies. (Later strategic taxonomies, such as those of the BCG Grid , and Michael's Porter classification of forces and strategies , are equally insightful and useful, and explore dimensions of strategy that Ansoff overlooks, including market share, financing needs and strategic advantage in the supply chain. But it is the simple utility of Ansoff's matrix with its focus on offerings and customers that make it valuable.) The matrix explores two key dimensions: Product: Businesses are defined by their product and services. Modifying them is a key strategic decision. Market: Companies are know equally by their current customers and the markets in which they are known for competing. Choosing to enter a new market is a fundamental strategic issue. Upper left: Product Development. The reputation of a brand enables it to sell new products to existing customers. Dannon , for example, grabbed acres of shelf space in grocery stores by continually pushing out new extensions to its yogurt line (fruit on bottom, no-fat, probiotics, etc). Lower left: Market Penetration: Selling more of the same product to existing customers. A classic orange juice campaign proclaimed "It's not just for breakfast anymore.

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