Tag Archives: models

Model is model – a quick draft

A sample of business model

Model is model, nothing more, nothing less.

Recently when I take a course about Corporate Strategy, I learn about various strategic diagrams. BCG1, BCG2, Life cycle diagrams… there are a lot of them.

Many of my classmates wonder why we must do this/that by a different way. Why we calculate relative market share based on relative comparison with the market leader; but for market leader, we compare with the second-follower?… Many questions, but the reason for all the confusion is that they are put down as “unquestionable reality” and are not easily explained by logic or mathematics.

So I feel the urge to note down a few things:

1. Models don’t decide reality. None of them does. So, if the BCG doesn’t fit your organization situation, feel free to drop it. Forget the classes and the lectures, they only give you the tools. What we really need is the model mindset – a method to use that powerful tool.

2. Models are made to reflect & simplify the world. They are used to explore ideas & explain knowledge. They help us make clearer thinking and focus on specific aspects of the reality. There are models all around us. From the map of a city, to the schedule calendar, or a quick draft of a painter… they are all models. They are not reality in its full sense: they reflects reality, with the focus on what we care about.

Let’s take the Hochiminh city map as an example. In a map, we don’t describe a city. We don’t show that the Ben Thanh Market is painted with yellow color, or The Palace of Independence is covered by a beautiful garden. What we really care about: they are streets & their directions, how to move from 1 point to another. So the map is made with only lines & dots, & symbols, to help you traveling.

The same applies for the BCG matrix. The real business environment is complex, so that people must come up with some simplification to get the direction. It doesn’t mean we must always drop the dog and feed the star. For some cases, if cleverly handled, a dog SBU can be positioned in a niche market and bring profits without much investment (becoming cash cow), while some stars must be dropped for gathering enough money to invest in 1-2 best stars.

Ok, so, BCG model means that in most cases, dropping the ineffecient SBUs is a good idea, so that we could save money for others. Damn, we can understand it without BCG, it’s normal logic. So why we need BCG? Because it’s too simple, easy to remember & understand. That’s all.

Therefore, please don’t get the model for itself, but understand it, and apply to the situation.