The Boston Consulting Group (BCG) Growth-Share Matrix was created in 1968 by BCG’s founder, Bruce Henderson. The chart helps companies decide how to allocate their resource and it also helps the organizations to prioritize different projects based on their degree of, and potential for, profitability.

The BCG Growth Share Matrix was published in one of BCG’s short, essays, called Perspectives. At the height of its success, the growth share matrix was used by about half of all Fortune 500 companies; today, it is still central in business school teachings on strategy.

The growth-share matrix is a portfolio management framework that helps companies decide how to prioritize their different businesses. It is a table, split into four quadrants, each with its own unique symbol that represents a certain degree of profitability: question marks, stars, pets (often represented by a dog), and cash cows. By assigning each business to one of these four categories, executives could then decide where to focus their resources and capital to generate the most value, as well as where to cut their losses.

To be successful, a company should have a portfolio of products with different growth rates and different market shares. The portfolio composition is a function of the balance between cash flows. High growth products require cash inputs to grow. Low growth products should generate excess cash. Both kinds are needed simultaneously.— Bruce Henderson

The matrix reveals two factors that companies should consider when deciding where to invest—company competitiveness, and market attractiveness—with relative market share and growth rate as the underlying drivers of these factors.

Each of the four quadrants represents a specific combination of relative market share, and growth:

  1. Low Growth, High Share. Companies should milk these “cash cows” for cash to reinvest.
  2. High Growth, High Share. Companies should significantly invest in these “stars” as they have high future potential.
  3. High Growth, Low Share. Companies should invest in or discard these “question marks,” depending on their chances of becoming stars.
  4. Low Share, Low Growth. Companies should liquidate, divest, or reposition these “pets.”

The Harvard Business Review (HBR) lists the Boston Consulting Group (BCG) Growth-Share Matrix as 1 of 20 charts that have changed the world.

 BCG) Growth-Share Matrix is used to teach managers to milk cash cows, divest dogs, invest in stars, and weigh the risks and rewards of question marks.

In his 2010 book, The Lords of Strategy: The Secret Intellectual History of the New Corporate World, Author Business Journalist writes:

In the late 1960s, in an attempt to help clients solve their problems with diversification, BCG conceived the growth-share matrix, whose power and reach over the next ten years would be unparalleled by any other device available to a diversified company’s management.

  • Star businesses should be defended, the thinking went, funded sufficiently that their growth kept up with overall market growth, so that when market growth slowed, they maintained their high share.
  • Cash cows, with their high share of low-growth markets, needed to be disciplined, their milk mostly channeled off to fund better opportunities—stars or question marks—and the calls of their managers for extra investment resisted.
  • Question marks might represent bright prospects for the company, but to gain share, they’d probably have to be funded aggressively. The mistake too many companies made was to put money into all their question-mark businesses, meaning that none got sufficient investment. Pick the best of the lot, give their managers the cash to grow, but do not expect profits in the short-haul.
  • As to dogs, alas. With their low shares of low-growth markets, they represented perfect examples of Hendersonian cash traps. You might squeeze them for whatever meager cash they threw off, or use them to try to block the moves of a competitor. But they also constituted promising candidates for divestiture. Sell them off, and invest the proceeds in your better businesses.