Frameworks are everywhere in business. Some, such as the BCG growth share matrix, Porter’s Five Forces, and SWOT analysis, have had a lasting impact on business strategy and practice. And many managers have created frameworks related to their own work. But why do some frameworks change the world while others … not so much? And how can business leaders best assess and strengthen the analytical frameworks they use?
What’s in a Framework?
Any kind of coherent thinking involves some form of conceptual framing. Conceptual frameworks are mental representations that order experience in ways that enable us to comprehend it. While philosophers and cognitive scientists devote a good deal of thought to these constructs, few of us ponder the matter much, no matter how often we use a particular framework.1
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Take the ubiquitous income (P&L) statement as an example: It’s a simple yet powerful way to make sense of the myriad transactions that occur in a business. Once we have framed financial exchanges as either revenues or expenses, we can begin asking and analyzing important questions about the business (such as “Why are we losing money?”). By adding a further dimension of assets and liabilities — using a balance sheet framework — we can derive a huge range of ratios and relationships that provide further insight for managing and valuing the enterprise. These concepts — revenue, expense, asset, liability — are so familiar that we may not even recognize them as conceptual structures. Yet there is nothing inherent in this balance system, and it is possible to imagine alternative accounting systems.2
While all frameworks are essentially arbitrary ways of sorting data, some are so powerful and pervasive that they shape how we see the world. What sets the best ones apart? Below is a rubric of seven criteria for evaluating business frameworks.
1. For one of the few examinations of this topic, see J. Gerring, “What Makes a Concept Good? A Criterial Framework for Understanding Concept Formation in the Social Sciences,” Polity 31, no. 3 (spring 1999): 357-393.
2. See, for example, a discussion of historical accounting methods in China in W. Yuan, R. Macve, and D. Ma, “The Development of Chinese Accounting and Bookkeeping Before 1850: Insights From the Tŏng Tài Shēng Business Account Books (1798-1850),” working paper 220, London School of Economics and Political Science, May 2015.
3. R. Waterman, T.J. Peters, and J.R. Phillips, “Structure Is Not Organization,” Business Horizons 23, no. 3 (June 1980): 14-26.
4. McKinsey’s 7S is referred to by its creators as a model rather than a framework. In some technical disciplines, the words “model” and “framework” are used to refer to different things. For the purposes of this article, I use the two terms interchangeably.
5. S.R. Covey, “The Seven Habits of Highly Effective People: Restoring the Character Ethic” (New York: Simon & Schuster, 1989).
6. Barbara Minto has spent most of her career developing and teaching methods for structuring thinking, writing, and problem-solving according to the Minto Pyramid Principle (B. Minto, “The Minto Pyramid Principle: Logic in Writing, Thinking, & Problem Solving” [London: Minto International, 1996]). While most people pronounce the term “MECE” to rhyme with “greasy,” Minto insists that it should be pronounced as a single syllable to rhyme with “niece.” See “Barbara Minto: ‘MECE: I Invented It, So I Get to Say How to Pronounce It,’” McKinsey, accessed Jan. 27, 2021, www.mckinsey.com.
7. By this point, it should be evident that most of the frameworks cited in this article have “been around the block.” The intention was to choose examples that would be familiar to many readers and point out some of the elements that have led to their successful use and endurance. While not all of these frameworks score high across all points of the rubric, the most successful constructs hit the mark on many of the evaluation criteria.
8. In the decade of the 1970s, BCG grew from 62 consultants in two offices to 277 consultants and seven offices.
9. The experience curve concept, first introduced by Bruce Henderson of BCG, holds that a company’s unit production costs falls by a predictable amount for each doubling of “experience,” or accumulated production volume.
10.The four P’s are product, price, place, and promotion; the five C’s are company, customers, collaborators, competition, and climate.
11. M.E. Porter, “Competitive Strategy: Techniques for Analyzing Industries and Competitors” (New York: Free Press, 1980).
12. W.C. Kim and R. Mauborgne, “Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant” (Boston: Harvard Business School Press, 2005).