We have all heard variations of the joke “A consultant is someone who borrows your watch to tell you the time, and then keeps the watch”. They get a lot of flak; some of it richly deserved. Their methods and tools are held up to ridicule, and their advice sneered at for pompously and expensively stating the blindingly obvious. But the good consultants have a particular skill, the ability to cut through the noise to the core of a problem and to confront decision makers with the choices they must face.
Now I am, of course, a consultant myself, and must share in the general odium and contempt for practitioners. But before entering on this dangerous trade, and while still a manager in multinational corporations, I hired and worked with consultants of many types, both good and bad. I wanted to learn the tools and methods they used to help me and my colleagues to think. And the tool I found most useful was the humble and ubiquitous 2×2 matrix.
The 2×2 matrix turns up everywhere. They appear in every management course or book, and in most discussions with consultants. Quickly sketched on the back of a paper napkin, or laboriously built in a spreadsheet. There are many types of 2×2 matrix and Alex Lowy and Phil Hood wrote a 300-page book on their classification and use.
The 2×2 matrix is at heart a simple tool, but capable of application in most areas of life. Two axes divide a space into four quadrants. Each quadrant implies a different decision, question, or action. You can use it to analyse business models, the attractiveness of markets, where to invest in innovation, risk management, group culture, personal time management, and so on. Anywhere you need to consider options, you can use a 2×2 matrix.
Different types of matrix for different questions
A classic from the world of business is the BCG Matrix or growth/share matrix. This asks is your market share high or low and is the market growth rate high or low? Each quadrant is a suggested strategy for the business:
- Low share, low growth – ‘Dogs’; find a way to get out.
- Low share, high growth – ‘Question marks’; should you invest to improve your share? Is that possible?
- High share, low growth – ‘Cash Cows’; milk these parts of the business for cash to invest elsewhere.
- High share, high growth – ‘Stars’; invest in these areas for future profits.
The real value of the BCG matrix is not that it gives a definitive answer on what to do, but that it will provoke a furious debate around how to classify your business, why things are where they are on the map, and what you will you do about it.
Another common business 2×2 is the Ansoff Matrix that looks at diversification strategies. Should you go for existing or new markets, and with existing or new products? It makes you focus on where your strengths are today, and what you can do to exploit those strengths.
I have often used this one to evaluate portfolios of innovation projects. A wise boss told me to watch out for projects in the new product/new market quadrant. That’s the space for ‘fire-breathers’. You have little information on the product and the market since both are new. You don’t see the pitfalls and it is easy to convince yourself that this is a fantastic opportunity. Too optimistic about product viability and attractiveness, market fit and growth rate, you crash and burn.
There are endless ways of organising the question the 2×2 matrix poses:
- How exciting is the idea vs how difficult it will be to execute?
- What is the risk/reward balance?
- What is the probability of a risk event happening compared to the impact if it did?
- Choosing ‘make or buy’ based on the strategic value and cost of an activity.
Direct business decisions are one way to use the 2×2 matrix, but it also works for organisational culture and ways of working.
I have written before about the social-styles matrix. A way of understanding the preferred ways of thinking of co-workers and how to work with them effectively.
In his book ‘The 7 Habits of Effective People’, Stephen Covey popularised the urgency/importance matrix for personal time managament. Spotting the time sinks of unimportant and non-urgent makework and geting rid of them. Minimising firefighting on unimportant but urgent tasks, and finding time for the important but non-urgent work that is the basis for future success but never gets done.
Although here are hundreds of 2×2 matrix templates for all sorts of questions; don’t be afraid to invent one that suits your purpose. If it illuminates the discussion and separates options, it has value. One of my favourites asked about the practicality of different upgrades for improving the energy efficiency of a house. Did it operate invisibly in the background or did it need user management? Was it ‘fit and forget’ or did it need regular maintenance by the supplier? ‘Fit and forget’ upgrades that need no user intervention (LED lighting) are an easier sell than complex systems that require constant attention (mechanical ventilation with heat recovery).
Using the 2×2 matrix
- A 2×2 matrix is a tool for thinking and communication; it does not provide answers. The debate and argument generate the value, either for a single individual or a group.
- A 2×2 matrix is qualitative, not quantitative. Relative position is important, not absolute position. Agonising about the precise placing of items is worthless and delays confronting how things compare. Numerical axes are rarely useful.
- Choose axes relevant to the topic and uncorrelated. Think about the question you are trying to answer and find a matrix where the quadrants fit. If your matrix is about risk and reward, it is not directly helpful when trying to decide whether to make or buy. It is also better to have axes that are not dependent on each other; that are not correlated. If one axis is risk and the other uncertainty, you cannot use the full space to spread things apart and emphasise differences since uncertainty increases risk.
- A good 2×2 matrix provokes. If it just confirms your initial thought, use a different set of axes, and change the questions. Use several matrices to give different perspectives.
- They make great conversation starters! A good matrix will drive lots of ‘why?’ and ‘what-if?’ discussions that dredge up our assumptions and make us confront them. That helps better decisions.