January 31, 2018 Madeleine

bcg matrix

The BCG matrix is a vital tool that is designed to help a business to plan a long-term professional approach with accuracy and focus while ironing out any question marks in the process. BCG stands for Boston Consulting Group and they have developed this product portfolio matrix to review one’s product portfolio so that they might determine when and where adjustments of any kind can be made. You might also hear the BCG matrix being referred to as the “BCG growth-share matrix” within certain parameters. When a company or organization is trying to decide whether to add, discontinue, or reassess existing products within their lineup, turning to the BCG matrix for insight is the first order of business. Market growth and relative market share are the two overriding principles that inform all four of the quadrants within the BCG growth-share matrix. Market growth is a term that refers to how much capital is used to produce a specific item or product. Relative market share refers to how much money a specific item or product is able to return for the company in relation to the initial investment made.

When you look at your product portfolio through the BCG matrix template model, the products or services that you find in the upper left-hand corner of the diagram are the ones that are most likely your best-selling offerings. They’ve got high market growth rates, but they’ve also got high value in terms of relative market share as well. The products in the upper right-hand corner are the ones with high market growth margins and low market share, so goods or services that end up classified in this quadrant are generally the most problematic. As a business owner, you would want to concern yourself with closely observing the offerings within this cell. Unless the products found here start performing well on the market all of a sudden, it would probably be in the best interest of the business to cease production on these goods. They cost the most to produce and they offer very little in terms of returns on initial investment. The products found in the lower left-hand cell are referred to as “cash cows” because they cost the least to produce while offering huge returns on investment. Business owners should always strive to have most of the goods or services they offer in their product portfolio classified under this category. Good and services found in the lower right-hand cell are known as “dogs” and they have both low market growth rates and low relative market share. Getting rid of any dog products in one’s portfolio is a strong idea as it will free up a lot of resources that could be better utilized on more popular product offerings.

SAAS business

Once the principles of the BCG matrix are understood, it becomes that much easier to make the correlation between it and the SaaS model of business. The acronym “SaaS” simply stands for ‘software as a service’, and cloud computing companies are the most commonly recognized types of businesses that fall under this umbrella. The software as a service model is fairly new and it’s an alternative to the more traditional method of software purchase that requires an upfront payment and custom installation of the software. SaaS businesses generally provide the most value to their customers because of the instantaneous access that they get to enjoy at all times, but moving into a new model of business without any clue about how it works is never an advisable idea. Once you’ve begun to do the work of getting more familiar with SaaS structures, easing into the changes that lie ahead should seem a lot more manageable.

For starters, SaaS companies want to make sure they’re collaborating with reputable professionals that provide the quality of work that they promise. The last thing you want is for one of your software products to be delayed in the production stages because an engineer dropped the ball. In SaaS business deadlines are everything: and you never want to see a small misstep turn into a huge issue. With cloud computing being such a new concept, it’s bound to continue to change and mature. That means that working with developers and engineers that are always right in step with changing trends is a crucial point to keep in mind. Depending on the Internet for all or most of your daily business dealings comes with both pros and cons and you also want to be sure to take this into consideration early on. What are your customers to do if they can’t access the Internet for some reason? How are they supposed to handle problems that might arise after the hours of operation at your office? You want to walk yourself through the motions of what it feels like to be one of your customers so you can know that you’re providing the highest levels of service and quality possible. If they like the way you operate, you won’t have to work hard to get them to come back to renew their subscriptions.

Just as with any other business industry, SaaS businesses can depend on the BCG matrix for the purpose of assessing all of the goods and services that they offer to consumers. This assessment can then aid them in making adjustments to their product line if and when that becomes a necessity. The fact that so much of a SaaS business is Internet-based should make it that much simpler to utilize the BCG matrix for assessment purposes. At this time, there are only so many different kinds of service that a cloud computing company can offer—so that should make the process of identifying products and services quick and painless. Having a smaller array of offerings means you’ll spend less time having to determine which offerings you might want to consider discontinuing.

Neglecting to make use of the BCG matrix in any sector of business is just downright silly and SaaS businesses are no exception to that sentiment. You want to always be striving for the evolution of your SaaS business and that evolution will only happen if you make it your mission to take charge!

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