Around 1970 a Boston consulting firm drew four boxes that told companies where to put their money. Half a century later, Google’s parent Alphabet runs the purest version of the idea — and its cash cow is under threat.
Easier version: read this lesson at A2/B1 level →
Ten items. Work through the four activities — say your answer out loud before you reveal it.
Three terms: core business · capital allocation · cash burn. Say the right one, then reveal.
Read each part. After it, there's a quick check (answer from memory first), then one question to discuss.
In 1963 Bruce Henderson started a small consulting unit in Boston that would become the Boston Consulting Group. Its clients were the giants of the age: conglomerates that owned dozens of unrelated businesses and had no clear way of deciding which ones deserved money. Every division manager arrived at the budget meeting with a confident forecast, and the loudest usually won.
Around 1970 the firm offered a simpler answer: a chart with two measures. Up the side, how fast a product’s market was growing. Along the bottom, its share compared with the largest competitor. Leaders in slow markets were cash cows, producing more money than they needed. Leaders in fast markets were stars. Small players in fast markets were question marks, and small players in slow markets were dogs. The logic was financial: milk the cows, use the cash to turn the best question marks into stars, and sell or close the dogs.
The idea spread very quickly. General Electric developed its own nine-box version with McKinsey, and a Harvard Business Review study published in 1982 found that close to half of the Fortune 500 had introduced some form of portfolio planning. But criticism grew too. Managers of businesses labelled dogs found their budgets cut and their best people moved, which made decline almost certain. Critics said the matrix treated a company like a pile of shares rather than a set of businesses that depended on each other. And during the 1980s many conglomerates were broken up by investors who believed the parts were worth more than the whole.
1. What problem inside conglomerates was the matrix designed to solve?
2. Give two criticisms of the matrix from the 1980s.
1. They owned many unrelated businesses and had no clear, objective way to decide which ones should receive investment; budget decisions tended to follow the most persuasive managers.
2. Any two of: labelling a business a dog could make its decline self-fulfilling (budgets and people removed); it treated a company like a financial portfolio and ignored how businesses depend on each other; conglomerate structures themselves came to be seen as destroying value.
Fifty years later, one company looks almost exactly like the matrix. Google’s search engine, and the advertising beside the results, became one of the most profitable businesses ever built. By the 2010s it was also paying for a remarkable collection of experiments: self-driving cars, which Google had started working on in 2009; internet balloons; delivery drones; research into ageing and disease.
In August 2015 the founders, Larry Page and Sergey Brin, reorganised everything. Google became one company inside a new parent called Alphabet, and the experiments became separate companies grouped as “Other Bets”. For the first time, investors could see the numbers. The bets brought in little revenue and, in most years since, have reported losses of several billion dollars. Over the following decade those losses added up to tens of billions — paid for by search.
The new structure came with more discipline. Ruth Porat, who became finance chief in 2015, was known for pressing projects to show a path to revenue. Some bets were wound down: the wind-power kites of Makani closed in 2020 and the balloon project Loon in 2021. Others began to take money from outside investors. Page and Brin could afford this kind of patience partly because their special voting shares gave them control of the company — something most chief executives do not have.
1. Why did the 2015 reorganisation matter to investors?
2. What changed in how the bets were managed after 2015?
1. Because the experiments were reported separately for the first time, so investors could see how much revenue they earned and how much money they lost.
2. There was more financial discipline: projects were pushed to show a path to revenue, some were wound down (Makani, Loon), and some took outside investment.
By 2025 some of the question marks were starting to look like stars. Waymo, the self-driving project begun in 2009, was giving hundreds of thousands of paid, driverless rides a week in several American cities. Google Cloud, a separate business, had become a large and growing source of revenue. Search and its advertising, however, still produced more than half of Alphabet’s income.
Then the cow itself came under pressure. When ChatGPT appeared in late 2022, millions of people began asking a chatbot questions they would once have typed into a search engine. Google responded with its own AI models and, from 2024, AI-written answers at the top of search results. But an answer that satisfies the user immediately may lead to fewer clicks on advertisements — the very thing that pays for everything else. In the same year, a US federal judge ruled that Google had illegally maintained a monopoly in search.
This is the dilemma the matrix does not solve. Protect the cow, and a competitor may do to search what search once did to newspapers and directories. Change it too quickly, and the money that funds the future may shrink before the future arrives. Some analysts say Alphabet proves the matrix still works: the cow paid for Waymo. Others say the lesson is the opposite — that the greatest risk to a portfolio is a change the chart cannot see coming. The question is still open: should a company milk the cow that pays for its future, or risk the cow to build the next one?
1. Why could AI-written answers be a risk to Google’s business, even if users like them?
2. Give one sign that some of the bets were becoming stars.
1. If people get their answer immediately, they may click on fewer advertisements, and advertising in search is what produces most of the money that funds the rest of Alphabet.
2. Waymo was giving hundreds of thousands of paid driverless rides a week in several US cities (and Google Cloud had grown into a large, growing business).
The end of every portfolio review is a recommendation: keep, invest, sell, close. Boards, consultants and regulators express these in a very particular grammar — a verb in its bare form after that, and a past tense that does not refer to the past. Used well, it sounds decisive and impersonal. Used badly, it sounds like a translated contract.
Write the correct form of the verb in brackets. You may need one, two or three words.
1. The consultants recommended that the loss-making division (sell) within two years.
2. It is vital that every business unit (report) its own profits and losses.
3. The chair proposed that the drone project (not / receive) any new funding this year.
4. Shareholders are demanding that the company (be) more open about what its experiments cost.
1. be sold 2. report 3. not receive 4. be
British English also accepts should be sold, should report, should not receive, should be. What is never correct here: reports, doesn’t receive, is.
Complete each sentence with the correct form of the verb in brackets.
1. That project has lost money for eight years. It’s high time we (stop) funding it.
2. I’d rather the board (not / hear) about this from a journalist.
3. It’s about time the company (tell) shareholders how much each bet really costs.
4. Would you rather we (wait) until the next quarter before we announce it?
1. stopped 2. didn’t hear 3. told 4. waited
All four refer to now or the future. The past form signals distance from reality: it hasn’t happened yet, and the speaker thinks it should.
This is the closing minute of a portfolio review. Complete each gap with the correct form of the verb in brackets, then deliver it aloud as if to a sceptical board.
“Our first recommendation is that the robotics unit (keep), but that it (require) to find an outside investor within eighteen months. It is essential that our core business (remain) the first priority for capital. Frankly, it’s time we (accept) that some bets will fail, and I would rather we (close) two projects this year than watch all six drift.”
be kept · be required · remain · accepted · closed
Gaps 1–3 also accept should be kept, should be required, should remain. Now say the same recommendation without this grammar — “We think you should keep…, you need to…” — and notice what happens to the authority of the speaker.
Take these into the Speak tab: the board wants the formal recommendation; the team whose project is closing wants to hear it in plain words.
A note on the figures: revenues, losses and ride numbers are rounded and taken from public reporting; this is a live case, and the numbers change every quarter.
All of it out loud, against the clock. A portfolio decision is made in the language of recommendation — and then has to be explained to the people who live with it.
Present this case to a board that is about to use the BCG matrix for the first time. Structure it: the conglomerates’ problem → the four boxes and the logic of cash → the spread and the criticism → Google’s cow and the bets → the 2015 reorganisation and the discipline that followed → the bets that closed and the one that is growing → AI and the threat to the cow → the open question.
Finish with one formal recommendation on how your board should — and should not — use the matrix. Use at least five key terms (conglomerate, cross-subsidise, moonshot, cash burn, core business, capital allocation, divest, wind down, segment, antitrust) and at least three recommendation structures.
You are the finance chief of a company like Alphabet at the annual shareholder meeting. An investor stands up and says: “You have lost tens of billions on experiments in ten years. Most have closed. Why shouldn’t you shut the rest today and give us the money back?”
Answer properly: acknowledge the losses in numbers, explain the logic of funding question marks, say clearly what would make you close a bet, and make one firm recommendation. Then do it again in ninety seconds — the compression is the exercise.
Take one project or product that is being wound down — real or invented — and announce it four ways, one minute each. Notice where the formal recommendation grammar helps and where it gets in the way.
Prefer not to use your own organisation? Take one of these instead: