Category Archives: Uncategorized

Glitch in the (McKinsey) Matrix

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The GE/McKinsey matrix is a classic strategy framework … gone bad. Initially thought to be a radical innovation, it guided flawed corporate diversification strategies of the 1980s. Indeed, it is still sometimes taught in business schools, and some consultants still sell this analysis as a service. My first intuition is to ignore it in class. Indeed, I’ve not discussed this framework in class since posting a collection of exercises from the late 1990s here where the data reflected the Sears Financial Network.

However, showing the framework’s flaws can help students to see what they should be looking for when analyzing diversification strategies. Brian Silverman suggested that we update the exercise so students would evaluate a disguised version of Disney’s portfolio using the tool. Without context, the studio and video game divisions appear to be “dogs” to be divested, and the theme parks seem to be stars. The relationship between the units is opaque. Once the company and divisions are revealed, it becomes apparent that the links between businesses are absolutely critical. Of course, the theme parks are especially valuable because they can leverage creative output from the studios.

Since my class is partially online, I created this Google sheet to facilitate the exercise that will accommodate up to 12 student teams. It would also prove useful in a large in-person class. Here’s how it works:

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Exercise: Planning to Pivot?

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An earlier post has all the materials for the Tinkertoy tower building exercise and it was published by Coff & Hatfield (2003) in JSME (Full text here). This variant of the exercise is especially valuable for teaching entrepreneurship as it focuses on the need to pivot from an initial plan/idea. Recent work (Kirtley & O’Mahoney, 2020) demonstrates how difficult the decision to pivot can be but this may be hard to fully convey to students without their experience of struggling to recognize the need to pivot. The modification is simple. During the 10-minute planning period, teams should:

  • Develop an initial plan/design for their tower.
  • Anticipate what might go wrong with their initial plan (as with the scenario planning variant).
  • Develop an alternative plan or adjustment that addresses the concern.
  • How would they know that there is a need to change the plan.
  • When would they know (how many seconds into the implementation period).

As with all Tinkertoy variants, many of the towers will fall at the very end and the teams will have missed their opportunities to adapt. Here, the debrief focuses on how they would design a test to identify what would go wrong (as in lean startup). For example, I have used Builderific toys instead of Tinkertoys which are quite flimsy. A good test would be to attach 3 pieces together and hold them out. It will be quickly apparent that the pieces bend and that the tower may not be stable. This can be determined in 20 seconds if they think to do it. The issue is that teams do not think carefully about how they would test their hypotheses even when they are prompted that something might go wrong. This clearly drives home the value of testing assumptions as well as the challenges of knowing when one needs to pivot from their original plan. Here are Coff’s slides as well as Coff’s spreadsheet which will help you administer the exercise more efficiently.

Contributed by Russ Coff

Cutthroat Kitchen & Strategic Factor Markets

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kt0201_alton-brown_s4x3_lgThis cooking competition show begins with an auction of resources needed to cook including space to work and cooking utensils. The contestants bid to preempt rivals by obtaining access to key resources while saddling them with inferior resources. This is ultimately quite similar to the egg drop auction exercise but it can be assigned as a “video case.” This is a nice way to introduce to students to the fact that fierce competition occurs in resource markets – an arena that they may be less familiar with. One can then explore different resources and how they are acquired (human capital, locations, technologies, etc.). It might even be an opportunity to assign them Barney’s original article on strategic factor markets.

Contributed by Isabel Coff

Entry Barriers (for Terriers)

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content-marketing-barriers-349x171Entry barriers are a critical element of Porter’s five forces framework. A key question is how firms get around the barriers. While the framework is at the industry level, a central part of the discussion is how the entry barriers might differ for different potential entrants. Some will have complementary resources or capabilities that make entry much easier. If a firm is considering entering a new industry, they want high entry barriers for all firms — except them. This sometimes sounds too good to be true until you discuss critical differences in resources and capabilities. This (admittedly silly) Doritos commercial from Superbowl 50 illustrates entry barriers and how some creative dogs get around them…

Contributed by Russ Coff