Six Frameworks Used By Consultants and Business Analysts: an Overview

Note: this article contains links to Bain & Company, McKinsey, and BCG, all American consulting firms. DPA has no relationship with any of these firms, and the links are provided for information only.

Below is introductory information on some common frameworks used by consultants and business analysts when they are looking at the performance of a specific company to assess its performance and to spot signs of potential trouble. While all can be useful to you as a small business owner, the ones we most recommend are Porter's Five Forces, the BCG Growth-Share Matrix and Core Competencies. These can be easier to work out for your firm, and therefore can be more relevant to you. We've used a small business/entrepreneurial focus when possible.

In a nutshell, these tools are:

1. Benchmarking

Benchmarking is comparing your own results to those of industry leaders, whether they are international, national or local. You would choose the results you want to assess and seek information on companies you want to compare with. Results for international and national companies, provided they are publicly traded, are relatively easy to find. Often, they are posted on their websites. However, you should look for an investors' website, as results are not normally available on their public-facing sites. Be aware that their annual reports, or reports to the Securities Exchange Commission, won't necessarily contain all the information you'd like to have, but they are a good source of standard financial data - gross profit, net profit, cost of goods sold, etc.

Not as specific, and requiring careful reading, Statistics Canada publishes average financial data for companies in a given industry. This data may reflect current conditions (especially those we are seeing during COVID), but it can give youa feel for what all reporting companies in the industry (not just publicly traded ones) are experiencing as of a given date.

Local data is much harder to come by, although it might be most relevant to you. An industry association might maintain aggregate average data, but this will be similar to Statistics Canada's information and won't necessarily reflect your community. 

Don't feel you are restricted to businesses in your industry. If there is a particularly innovative company you'd like to compare yourself with, you can search for information on it as well.

Typical areas used for benchmarking are:

The Bain & Company article is here.

2. Balanced Scorecard

When it comes to comparative metrics, money isn't everything. The balanced scorecard approach looks beyond financial results at broader indicators of performance. This is not to say that finance is ignored; it's just treated as part of the story. In this analytical approach, you can compare your performance against your goals in a variety of areas:

You may want to identify other metrics as well. The important thing is to look at data over time so you can identify trends and see how you're progressing.

The article from Bain & Company is here.

3. Porter's Five Forces

This approach was developed by Michael Porter, an American author of books on business strategy. As such, it takes a higher-level look at the forces impacting an industry as a set of inputs determining a company's strategy. This type of analysis is also useful in the initial planning stages for a business, to help you judge between competing attractive opportunities. The five forces Porter identified are:

By assessing the five forces at the outset and as your gusiness grows, you are able to keep ahead of changes in your competitive landscape.

4. The GE-McKinsey Nine-Box Matrix

This matrix, developed by General Electric and the large American consulting firm McKinsey, is a good way of evaluating whether you should take advantage of a particular business opportunity. It requires you to evaluate the opportunity in terms of its general attractiveness by rating it "high", "medium" or "low" on two axes -" industry attractiveness" and "competitive strength":

An opportunity with a growing, profitable market in which you are well-positioned to take a leadership position would be rated "high" and one you would want to take advantage of, while one with a mature product, high barriers to entry, little or no opportunity to innovate, and a stable or decreasing market would be "low" and one you would avoid. "Medium"? You would want to do more research and/or more thinking before arriving at a decision.

Read more about this at McKinsey.

5. The BCG Growth-Share Matrix

This analytical tool, developed by the Boston Consulting Group (BCG), another large US consulting firm, can be used to help you evaluate the relative strengths of your products or product lines. In this matrix, products/product lines are broken into 4 categories:

In classifying your products/product lines, do not forget to evaluate whether your question marks and dogs contribute or lead to sales of stars or cash cows. You can read about this at BCG's site.

6. Core Competencies

This analysis gives you insight into some components of the other analyses above. They help you define your positioning and competitive advantage. What do you do that your competitors cannot (or will not) easily replicate? Your core competencies may be in the following areas:

Individually or together, your core competencies provide an edge on your competitors and may be your unique selling proposition. More information is available at Bain & Company.