Prioritization matrix for competitive advantage
Professional Services Organizations
comprise a diverse set of firms - information technology, management
consulting, audit & advisory, architecture, engineering, recruiting, marketing,
advertising, public relations, legal, research & development, training etc.
Here’s a matrix for analyzing various
initiatives/ business segments. It’s in the form of a quadrant (four boxes) taking
as its axes – ‘cash flow’ against ‘differentiation’. It is useful for selecting
initiatives to actively focus and allocate your resources in order to maximize
profits and get highest value returns. It may also help you analyze your
revenue stream and redefine offerings in the market.
Some of the business initiatives/
units for a typical Professional Services Organization are:
Staffing services, advisory
services, managed services, project-based consulting, strategic planning,
process re-engineering, change management, integration services etc.
Quadrant 1: Low Cash-flow & Low Differentiation
These are commoditized areas
where your market presence is weak due to lack of differentiation. These
initiatives generate barely enough profit to maintain the sustainability of the
unit. Furthermore, they depress the company's profitability over a period of
time.
Recommended Actions:
- Dilute your focus
- Avoid any capital investments
Quadrant 2: High Cash-flow & Low Differentiation
These units generate quick & surplus
cash in comparison to the amount needed to maintain them. If competition is high
and there are few opportunities for differentiation; then it may be less
attractive for further investment. These units are regarded as dull and boring
in a mature market.
Recommended Actions:
- Harvest the cash-flow & maximize profits
- Invest resources only if it gets immediate ROI
- Increase market share by volume discounting
Quadrant 3: Low Cash-flow & High Differentiation
These units are niche and/or
fragmented segments with a potential to grow. They could generate higher
revenue and improve the company’s competitive advantage. You need to work
incrementally to gain market share. If you do not succeed then the unit might
consume a lot of cash and hinder your profitability; and drain your resources.
Recommended Actions:
- Expend efforts wisely and in a discretionary manner
- Use innovation to differentiate from competition
Quadrant 4: High Cash-flow & High Differentiation
These are areas where you are
well-established and you have a good reputation with clients. It’s a growing
market with many opportunities and scope for building your own market share.
Recommended Actions:
- Focus actively on this business
- Grow market share by engaging your best resources
- Make continued investments
