The Boston Consulting Group was established by Bruce D. Henderson, becoming an independent company in the 1970s. Initially employed by the Boston Company, Harvard Business School and Vanderbilt University alumnus Henderson founded a one-man unit offering over-the-telephone consultations, which he called Boston Consulting Group.
In 1975, BCG was spun-off from the Boston Group through an employee stock ownership plan instigated by Henderson, with a complete share buy-out finalised by 1979. Rich Lesser became CEO of BCG and the company’s sixth president in 2013. Between 2013 and 2014, Joey Horn was sector manager for the retail practice. BCG began not as simply another consultancy firm, but as a pioneering, innovative business with a bold new approach. For an overview of the recruitment process, check out the accompanying pdf.
Building a Lasting Advantage
Since 1963, the Boston Consulting Group has been helping to build lasting advantages for organisations and their leaders. The driving force behind BCG has always been to help businesses find the solutions that are required to seize advantage over the competition, looking beyond the obvious and challenging the status quo. The pioneering strategy first implemented by Bruce Henderson has thrived and helped to establish the strong reputation of BCG within the marketplace. The short video attachment shows how successful BCG has been. The speciality of strategy that BCG adopted revolutionised forever the process of business management. Unique ideas and analyses have led to an unparalleled record of thought leadership and strategic breakthroughs.
The foundation of the Boston Consulting Group rests on three key concepts – the experience curve, the growth-share matrix and the advantage matrix. The infographic details some of the awards BCG has won over the years for this strategy.
The Experience Curve
Bruce Henderson was given the idea for the experience curve through pricing behaviour at his previous place of employment, the Westinghouse purchasing department in Pittsburgh. The experience curve shows that the more frequently any good or service is produced, the lower the costs of production become. Every time the cumulative volume of production doubles, there is a calculable and constant decrease in value-added costs such as manufacturing, marketing, distribution and administration. Therefore, firms which can capitalise on relatively low operating costs are able to seize a strong strategic advantage over the competition.
The Growth-Share Matrix
The growth-share matrix refers to a concept revolving around a simple chart formation for cash allocation within a business. The two-by-two grid divides a company’s assets into four categories – stars, question marks, cash cows and dogs. Assets fall into the star category when they have high rates of both relative market share and market growth rate. Cash cows have a low market growth rate, but a high relative market share, with question marks being the reverse. Assets in the dogs class have low relative market share and low market growth rates. By moving money towards assets in the classes of stars and question marks, with the highest market growth rates, businesses can increase their upside potential.
The Advantage Matrix
The advantage matrix is laid out in the same format as the growth-share matrix, but with focus on economies of scale. In the advantage matrix grid, the four categories are volume, specialised, stalemated and fragmented business, with the axes showing the size of the business advantage and the number of approaches available to achieve those advantages. Specialised businesses gain advantage from both differentiation and economies of scale. Volume businesses do not offer many opportunities for differentiation yet have considerable economies of scale. Fragmented businesses benefit a lot from differentiation, but far less from economies of scale, while stalemated businesses benefit from neither.