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Two-by-Two Matrices

A special form of the bivariate chart, two-by-two (2×2) matrices became popular in the 1960s and 1970s with the advent of modern management consulting. Sometimes also called quadrant charts, two-by-two grids cluster the data in an X-Y plot into four boxes, divided by crosshair-like grid lines at the center of the chart. Two-by-two matrices abound in management circles and have even spread to the lay public. Steven Covey's "Seven Habits" Urgency/Importance grid, for example, introduced the technique to millions of readers. And the Gartner Group's "Magic Quadrant" 2×2 matrix is well known to IT professionals.

As a management consulting device, the 2×2 matrix offers a powerful framework for analyzing business problems. The Boston Consulting Group's Growth-Share Matrix, shown in Figure 6-17, was one of the early 2×2 matrices. Its success with clients helped the firm establish its reputation as a leading strategic adviser. The technique is fairly simple: the analyst plots the company's set of products according to the growth rate of each product's market segment (y-axis) and its share of the market relative to competitors.9 Products with high relative shares in fast-growing markets are designated "stars." Those in slow-growing markets are considered "cash cows" if they command a significant share, and "dogs" if not. Finally, slow-selling products in high-growth markets are called "question marks" because they could transform into stars if their market shares go up, or wither into dogs if the overall market cools.

Figure 6-17

Figure 6-17 The Boston Consulting Group Growth-Share Matrix (2×2 Matrix)

The Growth-Share Matrix might seem simple—deceptively so, in fact. Yet this form of 2×2 grid has proven to be tremendously resilient because it:

  • Speeds comprehension by grouping data into simple buckets. Most good managers are pattern-finders; they want to make sense of things. Classifying a potentially large data set into quadrants speaks to this natural human impulse.
  • Facilitates cross-sectional comparisons. Within each quadrant, the reader can perform rapid comparisons among data points as a way of understanding how quadrant members are alike (or different).
  • Exposes the analytical process. Bivariate plots (plots containing two variables) such as the BCG matrix use two labeled, quantitative axes to display results. The reader understands the explanation for each point's plot position simply by looking at the axis labels.
  • Presents a small, logical set of management options. In addition to the designated label, each quadrant contains straightforward advice. In this example, the options are to invest in stars, maintain cash cows, selectively invest in question marks, and divest the dogs.

These benefits accrue to all 2×2 grids, not just the BCG Growth-Share matrix. In fact, the logic and power of 2×2 grids have proven sufficiently compelling that authors have devoted entire books to the subject.10

In addition to these explicit and obvious benefits, 2×2 grids contain an unintended—rather subtle—consequence. By its nature, the 2×2 grid constrains the decision space. It is a compartmentalized box; all the data in the analysis must sit in one of the four compartments. By carefully choosing the quadrant boundary values and labeling scheme, the analyst can literally frame the decision-making process.

I can personally testify to the power of having a constrained decision space by relating a story about @stake's signature exhibit, the Business Impact Matrix. Early in the spring of 2000, I successfully sold and managed @stake's first contract, a $35,000 engagement to assess the security of a business-to-business commerce website. Of course, since this was the first engagement in the company's history, we needed to invent everything from scratch—the document template, the graphic design, boilerplate text, and exhibits. Fortunately, we had budgeted sufficient time to prototype most of the essential parts of the document.

On the day before the due date, my technical team was busily writing up the detailed findings portion of the document per our agreed-upon formats. I took responsibility for writing the Executive Summary. As overall project leader and lead consultant for the firm, I was painfully aware that presentation and conciseness mattered. In particular, I wanted to make sure that the Summary came in under two pages, including a nice snappy graphic that summarized our technical findings. Figure 6-18 shows the final exhibit for the engagement—a classic 2×2 grid that I later named the Business Impact Matrix.

Figure 6-18

Figure 6-18 @stake Business Impact Matrix (ca. 2000, Redrawn)

The Business Impact Matrix displays three attributes for each security defect: the degree of exploitability (y-axis), cost to fix (x-axis), and business impact (size of bubble). All attributes are normalized to a 1-to-5-point scale.

Although I am naturally biased on the subject, it is fair to say that the Business Impact Matrix contributed more to the early success of the firm than anything else we did. Of course, it helps to understand what the sleepy security consulting world was like in 1999 and 2000. Most of our competitors—Big Five accountancies—tended to send in kids with network scanners, who would drop off phone-book-sized reports at the end of engagements. Some of the newer, pure-play consultancies like Guardent (now part of VeriSign) and Rampart Security (later renamed Foundstone, now part of McAfee) appeared to do much the same thing.

Against this backdrop, the Business Impact Matrix represented genuine innovation. Our clients loved it; sometimes they would literally tear off the first few pages of the report (with the exhibit) and send it to their bosses. Prospects loved it, too, because they could instantly see exactly what they would get from an @stake engagement. Although Symantec retired the Business Impact Matrix shortly after acquiring @stake, it proved its worth in hundreds of client engagements.

When creating bivariate exhibits, consider the 2×2 matrix as an alternative method of display. Ask yourself whether the axes can be sliced into quadrants and labeled. If so, you may be on the verge of discovering something innovative yourself!

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