The GE-McKinsey Nine-Box Matrix is a strategic tool used to analyze a company’s business portfolio and make informed investment decisions. It helps organizations allocate resources efficiently by evaluating business units based on their industry attractiveness and competitive strength.

Understanding the nine-box matrix

The GE-McKinsey Nine-Box Matrix is a grid that divides business units into nine categories based on two dimensions:

1. Industry attractiveness – This measures how favorable the industry environment is, considering factors such as market growth, profitability, and competition.
2. Competitive strength – This assesses the business unit’s ability to compete effectively in the industry, including factors like market share, brand strength, and operational efficiency.

The matrix is divided into nine cells:

• High attractiveness/High strength (top-left)
• High attractiveness/Medium strength (top-center)
• High attractiveness/Low strength (top-right)
• Medium attractiveness/High strength (middle-left)
• Medium attractiveness/Medium strength (center)
• Medium attractiveness/Low strength (middle-right)
• Low attractiveness/High strength (bottom-left)
• Low attractiveness/Medium strength (bottom-center)
• Low attractiveness/Low strength (bottom-right)

Real-world example: General Electric (GE)

General Electric (GE) originally used this matrix to manage its diverse portfolio of businesses. For instance:

• Healthcare division: High industry attractiveness and high competitive strength. GE invested heavily in R&D and expanded its market share.
• Consumer electronics: High industry attractiveness but lower competitive strength due to intense competition and technological changes. GE decided to divest or scale down this unit.

Applying the matrix to your startup

For your startup, the process involves:

1. Identifying business units or product lines: List all your products or services that you want to evaluate.
2. Assessing industry attractiveness: Evaluate each market or industry you operate in. Consider growth rates, profitability, and competition.
3. Evaluating competitive strength: Assess how strong each business unit is in its market. Look at market share, brand reputation, and operational capabilities.
4. Plotting on the matrix: Place each unit in one of the nine cells of the matrix based on your evaluations.
5. Developing strategies: Formulate strategies based on the matrix position:

• High attractiveness/High strength: Invest and grow.
• High attractiveness/Medium strength: Improve competitive strength or invest selectively.
• High attractiveness/Low strength: Improve capabilities or consider partnerships.
• Medium attractiveness/High strength: Maintain or optimize.
• Medium attractiveness/Medium strength: Manage for cash flow.
• Medium attractiveness/Low strength: Restructure or divest.
• Low attractiveness/High strength: Extract value or consider divestment.
• Low attractiveness/Medium strength: Consider exiting or restructuring.
• Low attractiveness/Low strength: Divest or exit.

Example for your startup

Assume your startup has three products:

• Product A: High industry attractiveness (growing market) and high competitive strength (strong market position).
• Product B: High industry attractiveness but low competitive strength (new entrant with potential).
• Product C: Low industry attractiveness and low competitive strength (declining market and weak position).

Applying the matrix:

• Product A: Invest further, explore new markets, and enhance offerings.
• Product B: Develop strategies to build competitive strength, such as increasing marketing efforts or improving product features.
• Product C: Consider divestment or redeploy resources to more promising areas.

By using the GE-McKinsey Nine-Box Matrix, you can make strategic decisions that align with your startup’s strengths and market opportunities, helping to optimize resource allocation and drive growth.