Startup idea generation and BCG matrix: An Entrepreneurs principle to growth

     

In the world where opportunities were shrinking and competition were growing, startups came up with different principle—innovate, solve and create. For them nothing stands better than something creative, something innovative, something that is extraordinary, after all it’s their job to understand, create and solve, from starting of industrial revolution era to till date innovation and problem solving had made many person millionaires and many person billionaires too.

    A singular idea in startup can have plural ways out there, but there are only certain singular ways which guided startups to climb the ladder of success and every times it’s the best one waiting out there. Before start reading this article I would like you to keep yourself in comfortable position to understand what Boston Consultancy Group matrix or in other words BCG matrix wants to say about your startup.

You must need to apply this principle successive growth of startup but before that let’s understand basics of BCG matrix:-

1. Bruce D. Henderson had created this matrix for Boston Consultancy Group (BCG) in 1970     to help corporate's to analyze their business units or product lines.

2.   BCG Matrix helps to understand the business at current or future stage

3.   BCG matrix shows the relative market share and market growth rate at High or Low level.

4.   It helps in decision making of where to invest, where to divest where to hold etc.

5. One part of BCG matrix tells the usage rate of cash and other the generation of cash through business operation.

Now let’s see what are those principle’s that can guide your startup to grow and prosper.

Principle 1: Hold your Star 

A core business product or service means the ultimate business which your startup is going to do till the existence of operation. The area in which you put the cash more and you generate more than the investment and that is the reason why we call it as STAR quadrant (I Quadrant). In this quadrant, the relative growth rate and market shares are very high. So, it always means the product or service line in which you invest the more money and money comes up with quadruple speed, it is always advisable to hold that product or service line for very longer period of time because it’s the STAR of your business and STAR is always in demand and will remain in demand. Ultimately, this principle only says hold the product or service line for longer period of time.

Related: MARKETING THEORIES – BOSTON CONSULTING GROUP MATRIX

Principle 2: Analyze the Question marked product or service line

To all you Entrepreneurs and Business Owner please keep this in mind the Question Mark quadrant can be your potential business unit which can either have good future growth or do have bad future growth. The QUESTION MARK (II Quadrant) here means, the product or service line has Low Market Share and High Growth Rate. So, keep this place for those business units on which you need to research more and require strategic thinking of future growth.

Related: BCG matrix for small business

Principle 3: Harvest the Cash Cow

Here it refers to the third quadrant which in now behaves as CASH COW (III Quadrant) for the business growth because the relative market share at this place is high and market growth rate is low. It simply means your product or service line industry generates huge amount of cash from it. So, you are earning more from this line and since the cash generation is more just suck all the cream from this product or service line till the existence of particular market and to know this where to invest the harvested amount keep reading this article till end.

Related: The Boston Consulting Group Matrix -- Revisiting Marketing Models

Principle 4: Divest the Dog out

At the point where your business’s product or service lines do not generate enough cash and don’t have enough market share, than Congratulations! you identified your DOG (IV Quadrant). Since it’s neither generating anything nor market has any present or potential growth, it is strictly advisable to divest all your investments from this product or service line. 

Related: How & When to use The BCG Matrix Techniques    

NOW IT’S TIME TO UNDERSTAND WHAT TO DO WITH AMOUNT WHICH YOU HAVE GENERATED FROM CASH COW

Principle 5: Investment in potential for successive growth

Since, you have generated enough cash from Cash Cow now it’s time to understand how strategically you can use those cash in your product or service line. There are three ways to invest this amount:-

i)             Invest that money into STAR product or service line, just utilize those cash to turn prospective customers to loyal customers or use those money for Research & Development (R&D) of STAR product or service line.

ii)            Secondly, you can invest that money into QUESTION MARKED product or service line. Here because question marked quadrant itself says that market share is low but growth is high which means strategic investment can help the business to grow and it can even turn this Question marked product or service line into Star product or service line.

iii)           Lastly, Research & Development (R&D) in both STAR and QUESTION MARKED product or service line. For some moment of time utilize this capital for R&D of both the product and service lines and then come up to the decision where to use those money. Keep this in mind have strategic approach in investments from Cash cow to these two product or service lines.

To apply this BCG matrix into your start-up idea generation will not only help your start-up to grow but also will help you to hack the growth at successive rate. After all our business is our business, none of your business (Bollywood movie dialogue).

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