PRIORITIZATION MATRIX FOR COMPETITIVE ADVANTAGE
Here’s a framework for analyzing various initiatives/ business segments.
Here’s a framework for analyzing various initiatives/ business segments. It’s in the form of quadrants (boxes) with its axes as ‘cash flow’ and ‘differentiation’. It is useful for selecting initiatives to actively focus and allocate your resources in order to maximize profits and get the highest value returns. It may also help you analyze your revenue stream and redefine offerings in the market.
Quadrant 1: Low Cash-flow & Low Differentiation
These are commoditized areas where your market presence is weak due to a lack of differentiation. These initiatives generate barely enough profit to maintain the sustainability of the unit. Furthermore, they depress the company's profitability over a period of time.
· Dilute your focus
· Avoid any capital investments
Quadrant 2: High Cash-flow & Low Differentiation
These units generate quick & surplus cash in comparison to the amount needed to maintain them. If competition is high and there are few opportunities for differentiation; then it may be less attractive for further investment. These units are regarded as dull and boring in a mature market.
· Harvest the cash-flow & maximize profits
· Invest resources only if it gets immediate ROI
· Increase market share by volume discounting
Quadrant 3: Low Cash-flow & High Differentiation
These units are niche and/or fragmented segments with the potential to grow. They could generate higher revenue and improve the company’s competitive advantage. You need to work incrementally to gain market share. If you do not succeed then the unit might consume a lot of cash and hinder your profitability, and drain your resources.
· Expend efforts wisely and in a discretionary manner
· Use innovation to differentiate from the competition
Quadrant 4: High Cash-flow & High Differentiation
These are areas where you are well-established and you have a good reputation with clients. It’s a growing market with many opportunities and scope for building your own market share.
· Focus actively on this business
· Grow market share by engaging your best resources
· Make continued investments