adl-matrix

What Is The ADL Matrix? The ADL Matrix In A Nutshell

The ADL matrix was developed and named after the consulting firm Arthur D. Little, Inc. (ADL) in the late 1970s. It is one of several portfolio planning matrices representing the various businesses of a company in two-dimensional form.  The ADL matrix is a portfolio management technique used to strengthen a product portfolio or strategic business unit.

Understanding the ADL matrix

The ADL matrix is most often associated with strategic planning at the business unit level. However, it is also effective when applied to product lines or at the individual product level.

Fundamentally, the matrix plots five competitive positions of a business against four maturity levels of the industry in which it operates. Insights from the matrix are then used by managers to guide general product strategy to attain a dominant market position.

In the following section, we will discuss each parameter in the matrix in more depth. 

Plotting the ADL matrix

Competitive position

The competitive position of a company is determined by assessing the following categories and criteria:

  1. Dominant – a rare position where a company has a monopoly or protected leadership within its market. Profits are consistently strong and market share is maintained.
  2. Strong – describing a company with a strong market position with a few competitors. The market is typically divided, allowing each player to make money.
  3. Favorable – or a company operating in a fragmented market with no dominant player. However, one player may still enjoy a competitive advantage in one segment of the market.
  4. Tenable – most commonly describing a company occupying a niche market or in a limited geographical area.
  5. Weak – companies in a weak competitive position are small players in an aggressive market. Their small size makes it difficult to maintain profitability. 

Industry life cycle

In the ADL matrix, there are four stages of the industry life cycle:

  1. Embryonic – a new or emerging industry characterized by rapid growth, little competition, new technology, and high investment and prices.
  2. Growth – a slightly stronger market with few competitors and strong sales. First movers enjoy significant benefits for bringing products to market.
  3. Mature – or stable markets with a stable customer base and market share. High competitive pressure means businesses focus more effort on differentiation.
  4. Aging – in aging industries, product demand decreases, and the cost of differentiation becomes prohibitively expensive. This causes some companies to abandon the market.

Interpreting the ADL matrix

With each combination of competitive position and industry life cycle stage, the matrix guides future strategy in twenty different scenarios.

Some of the more pertinent combination scenarios are provided below:

  • Dominant position/embryonic industry – maintain position by preventing the establishment of new businesses. Efforts should be focused on securing as much market share as possible.
  • Dominant position/aging industry – hold dominant position and milk the market.
  • Favorable position/growth industry – invest in the business to increase market share.
  • Favorable position/mature industry – find a niche within the market that facilitates growth while protecting the current position.
  • Weak position/embryonic industry – get out of the market if profitability cannot be assured.
  • Weak position/aging industry – abandon the market.

Key takeaways:

  • The ADL matrix is a portfolio management technique and may be used to strengthen a strategic business unit (SBU), product portfolio, or individual product.
  • The ADL matrix plots the competitive position of a business against the maturity of the industry it operates in, with the latter based on a four-stage life cycle.
  • Each combination of competitive position and industry maturity on the ADL matrix yields twenty different scenarios that influence future strategy decisions.

Other Business Matrices

SFA Matrix

sfa-matrix
The SFA matrix is a framework that helps businesses evaluate strategic options. Gerry Johnson and Kevan Scholes created the SFA matrix to help businesses evaluate their strategic options before committing. Evaluation of strategic opportunities is performed by considering three criteria that make up the SFA acronym: suitability, feasibility, and acceptability.

Hoshin Kanri X-Matrix

hoshin-kanri-x-matrix
The Hoshin Kanri X-Matrix is a strategy deployment tool that helps businesses achieve goals over the short and long term. Hoshin Kanri is a method that seeks to bridge the gap between strategy and execution. Strategic objectives are clearly defined and the goals of every level of the organization are aligned. With everyone moving in the same direction, process coordination and decision-making ability are strengthened.

Kepner-Tregoe Matrix

kepner-tregoe-matrix
The Kepner-Tregoe matrix was created by management consultants Charles H. Kepner and Benjamin B. Tregoe in the 1960s, developed to help businesses navigate the decisions they make daily, the Kepner-Tregoe matrix is a root cause analysis used in organizational decision making.

Eisenhower Matrix

eisenhower-matrix
The Eisenhower Matrix is a tool that helps businesses prioritize tasks based on their urgency and importance, named after Dwight D. Eisenhower, President of the United States from 1953 to 1961, the matrix helps businesses and individuals differentiate between the urgent and important to prevent urgent things (seemingly useful in the short-term) cannibalize important things (critical for long-term success).

Decision Matrix

decision-matrix
A decision matrix is a decision-making tool that evaluates and prioritizes a list of options. Decision matrices are useful when: A list of options must be trimmed to a single choice. A decision must be made based on several criteria. A list of criteria has been made manageable through the process of elimination.

Action Priority Matrix

action-priority-matrix
An action priority matrix is a productivity tool that helps businesses prioritize certain tasks and objectives over others. The matrix itself is represented by four quadrants on a typical cartesian graph. These quadrants are plotted against the effort required to complete a task (x-axis) and the impact (benefit) that each task brings once completed (y-axis). This matrix helps assess what projects need to be undertaken and the potential impact for each.

TOWS Matrix

tows-matrix
The TOWS Matrix is an acronym for Threats, Opportunities, Weaknesses, and Strengths. The matrix is a variation on the SWOT Analysis, and it seeks to address criticisms of the SWOT Analysis regarding its inability to show relationships between the various categories.

GE McKinsey Matrix

ge-mckinsey-matrix
The GE McKinsey Matrix was developed in the 1970s after General Electric asked its consultant McKinsey to develop a portfolio management model. This matrix is a strategy tool that provides guidance on how a corporation should prioritize its investments among its business units, leading to three possible scenarios: invest, protect, harvest, and divest.

BCG Matrix

bcg-matrix
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.

Growth Matrix

growth-strategies
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).

Ansoff Matrix

ansoff-matrix
You can use the Ansoff Matrix as a strategic framework to understand what growth strategy is more suited based on the market context. Developed by mathematician and business manager Igor Ansoff, it assumes a growth strategy can be derived by whether the market is new or existing, and the product is new or existing.

Main Free Guides:

Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"