Page 254 - (DK) The Business Book

252 PRODUCT PORTFOLIO

he term “cash cow” refers
IN CONTEXT to an investment or area of
T business that provides a
FOCUS
dependable source of revenue. In a
Product assessment
corporate context, the cash cow is
KEY DATES the product or service that buoys As entrepreneurs, we adore
9000 BCE Cattle, including profits year in, year out and provides shiny new things. But don’t
cows, are used as the first funds so the business can grow. It forget to give some love to the
form of currency. brings cash in, which becomes the (cash) cows that keep the
lifeblood: contributing most of the business going.
Mid-1960s Peter Drucker operating expenses; paying for John Warrillow
uses the term “cash cow” development, launch, and support of UK entrepreneur (1971–)
in the context of business new products; and propping up it’s
management. less profitable ventures.
1968 The Boston Consulting
Group devises the growth- Cash generator
The cash cow is typically a product
share matrix: a model for
that has reached maturity in its life
categorizing a company’s
cycle. Like its real-life counterpart, a product that is an easy cash
products according to its
its initial cost has been paid off, it generator. He was drawing on the
market share and growth
needs little maintenance, and it history of commerce in his analogy:
potential.
can be “milked” for the rest of its livestock such as cows, goats, and
Early 1970s Consultancy life. Although such products may camels served as currency from
company McKinsey & no longer be growing, they still around 9,000 BCE. While Drucker
Company develops alternative generate substantial revenue understood the value of the cash
GE–McKinsey matrix with because they have good market cow, at the same time he cautioned
client General Electric. share and no longer require much against overreliance on it. He
capital outlay to keep them going. advocated a strategy of planned
1982 H. C. Barksdale and Management veteran Peter abandonment when the cash cow
C. E. Harris publish their new Drucker is said to have first used is challenged by another product,
matrix in “Portfolio analysis the “cash cow” metaphor in the potentially a rival within the
and the PLC.” mid-1960s; he certainly referred to company’s portfolio, which is
it throughout his career to describe growing faster.

The Boston Consulting Group

In 1875, the Boston Safe Deposit thinkers Bruce Henderson (1915– the company. Initially finding it
and Trust Company was set up 1992) led to the founding of the difficult to land clients and
in its home port in New England Boston Consulting Group (BCG). compete against larger
to offer safekeeping services to This management consultancy consultancies, Henderson came
local merchants and ship owners. was essentially a one-man band up with the idea of offering
Run by several generations of the with Henderson at the helm. “business strategy” as a unique
prominent Bostonian family, the Henderson had been a Bible service. A few years later, with
Lowells, the company had grown salesman before completing an a team of 36, Henderson devised
by the 20th century to become a engineering degree at Vanderbilt the now-famous growth-share
prominent financial institution. University, Nashville, and going on matrix (1968). His company,
In 1963, a chance meeting to study at Harvard Business BCG, has since grown to
between the Boston Safe School. He joined Westinghouse become a significant global
Deposit and Trust Company Corporation before graduating, management consultancy
CEO John Lowell and one of the becoming one of the youngest employing more than 2,000 staff
US’s brightest management vice-presidents in the history of in 75 offices around the world.