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Portfolio Analysis: Igniting a long-term spirit in a short-term world (XVIII). GE Portfolio Matrix Continuum

“How I wish I’d spoken up
Or we’d be carried
On the reign of love”

Coldplay, 2008.

Listening to “The Reign of Love” is quite noteworthy. Exploring its lyrics is much more. The last part of the song shows us a certain kind of “what if” sense, a feeling of being remorseful of keeping hidden something inside for quite a while, the compunction and sorrow of hiding affection and love instead of revealing it. Here we land again in the definition of truth, sincerity, and in consequence, we disembark in integrity. How many of us end up living a lie, that could have ended years ago, if we were valiant enough to say the truth?

In our personal circle, how many of us have been in passionate and tender devotion with someone and never told this truth to the adored one. Instead, we kept our feelings suppressed, or some associated with the wrong person, letting time pass by, giving up our caring truth, and carry on as if nothing happened. Everything, in the name of fake love? How many of us have shut our destiny to be loved in return, simply because we never say that we were deeply in love with that person? How could it be that we keep silent the word “love”? At least to say it means freedom… it doesn´t matter if the purpose of affection accepts your love in return, but to say the truth is liberty. Love is a decision to express it. Lucky enough if we get accepted, but just to declare it means liberation. Otherwise, we regret it until the day we to go heaven.

In the professional area, how many of us never say a statement that we disagree with certain features of how business models and strategy frameworks are designed? How many of us (particularly consultants) recognize that something is not right when doing research, or when gathering information, or when playing with data, or when crunching excel sheets, or when offering presentations or defining solutions to clients; and we shut up our thoughts, knowing in advance that we would have ignited a breakthrough of rectitude if we would have said it? How many of us know now that to keep a balanced planet, we must speak, and say, and write, and appear not just under a critique role, but we can extend our “grain of sand” to create a better understanding of the problems, so we can tackle much balanced solutions?

No more “How I wish I´d spoken up”. We have the strength to ignite love into our endeavors. Love that is more than charity. Love that is more than to participate in foundations or NGOs for giving assistance to the poor. When we detect an anomaly we have the right to say the truth. From inside out. We can stand up in each of our jobs, and gently (with our most educated voice) say the truth of love. We don´t need to yell or be silent. We simply require trying, to say or write it with delicacy, to insert a pinch of love in our ventures. To provoke wholesome debates, to incite the meaning of solidarity and human wellbeing, to always remember that our businesses must be based on the expansion and protection of the middle class, to include the protection of the environment in every single step of our value chains, to stop modern slavery in all forms, to break all sources of indirect crime (as abortions or euthanasia), to halt bad recommendations to employees that don´t fit with your company but can fit with other entities… So many ways we can speak and defend the truth. Always.

For example, when CEOs, Corporate head directors, and SBU managers are aware of the conditions of living of their workforce, they think twice before making decisions of divestments or laying them off. Why? Because once the person in power visits and acknowledges the housing, living style, and the neighborhoods of every single employee and their respective families, they appreciate in advance what their laborers and respective families lack off. Each SBU is handled by people, and instead of caring for financial returns, each boss must care for the well-being of each and all employees under his or her mandate.

GE´s matrix analysis of the future for each SBUs. Today´s post is about the continuum of explaining to you the GE Multidimensional Portfolio Model, therefore let´s proceed.  We ended our last post by positioning businesses in the GE matrix using the weighted score approach, and each SBU circle represented the size of the industry. The shaded darker wedge characterizes the firm´s current market share.  Once we finish with STEP 4, we are simply determining the present position of each SBU. At this stage, voila! we found the current present tense position for each SBU. But the job doesn´t end there. We need to move a footstep forward to project for the future and predict forthcoming trends.

Where we stand today with the material about GE Matrix.

Step 5. Forecasting the trends of each external factor (Y-axis). Assessing what will happen with the future of an industry is not an easy task. We must revisit each of the external factors that we defined previously.  We must challenge ourselves by asking ourselves questions. And that means, tons of questions: What is most likely to happen in the foreseeable future? How can we become a Fairy Godmother to anticipate the industry future? Do we think that a future war may occur in the next decade? How will it affect the value chain of the SBU? Do we consider a new pandemic as the last one of COVID-19? Do we think that a cyber-attack may happen in our communications? For how long? What type of government will expose a critical situation for my company’s SBUs? What type of regulatory possibilities will befall soon? What about inflation? What about currency risks associated with digital money? So many questions!!! Therefore, it is not possible to assert one future scenario, but a variety or several alternative scenarios. Normally in corporate finance, the span we use in banking is of 5 years, for medium-term investments. This is a typical span to forecast. So we must calculate several scenarios for different economic, technological, political, governmental, social, and industry factors that may arise in the following 5 years. And then, what we do is to list the factors chosen in STEP 2 and we begin to change the weights and the ratings that may happen in the future. 

Please, I would appreciate it if you can continue exploring the process by reading the next set of slides.

Steps 6, 7, and 8 are explained in the presentation above.

We will stop here, and we will continue next week by expanding some criteria for step 8. Formulating strategies for each SBU requires that you become an artist in corporate strategy. To foresee the future in our current context of disruptive technologies can´t be projected using algorithms. It requires experienced professionals with carats of learning from mistakes. Trust me, endured gray hair is golden. Before moving on to the SHELL DIRECTIONAL POLICY MATRIX, we will land into how to use the GE matrix, by including the human and environmental factors that are missing, and then you will see the change of perspective, in deciding of entering an industry, stay-in, select a cautious path for selective growth, harvest, or divest.

See you next week with a new episode on how the corporate strategy is made by using these frameworks. Blessings and see you again soon.  The happy first week of October is already yours.

Sources of reference utilized today to prepare the slides above:

(1) Hax, A. and Majluf, N. “The use of the Industry Attractiveness-Business Strength Matrix in Strategic Planning”. Interfaces. 1983. Vol 13 NO. 2.

Disclaimer: Illustrations in Watercolor are painted by Eleonora Escalante. Other types of illustrations or videos (which are not mine) are used for educational purposes ONLY. Nevertheless, the majority of the pictures, images, or videos shown on this blog are not mine. I do not own any of the lovely photos or images posted unless otherwise stated

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