ADL Matrix

How industry position influences your strategy

Part of thinking about strategy involves thinking about the state of your industry; understanding
how your organization fits into it; and, from this, figuring out your best way forward.

While there are many tools that help you do this, you can get particularly useful insights with the
Arthur D Little (ADL) Matrix. Developed in the late 1970s by the highly respected Arthur D
Little consulting company, it helps you think about strategy based on:

 Competitive Position - How strong is your strategic position?

 Industry Maturity - At what stage of its lifecycle is the industry?

Using the ADL Matrix

If your business unit has a strong market presence and a newly emerging product line, you’ll
likely want to aggressively push its position and capture as much market share as you can. But
this strategy does not apply so well to business lines with dominant competitive positions in
declining markets. In this instance, you’re better off putting your energy into new, growing
markets and simply maintaining your current market position in the declining industry.

The ADL Matrix addresses these unique needs by recommending general strategies for different
combinations of competitive position and industry maturity.

Tip:
The ADL Matrix is often associated with strategic planning at
business unit level. However it works equally well when applied to
product lines, or at the level of an individual product.

Industry Maturity
There are four categories of industry maturity (also referred to as the industry life cycle):

1. Embryonic – The introduction stage, characterized by rapid market growth, very little
competition, new technology, high investment and high prices.

2. Growth – The market continues to strengthen, sales increase, few (if any) competitors
exist, and company reaps rewards for bringing a new product to market.

3. Mature – The market is stable, there’s a well-established customer base, market share is
stable, there are lots of competitors, and energy is put toward differentiating from
competitors.
 4. Aging – Demand decreases, companies start abandoning the market, the fight for market
share among remaining competitors gets too expensive, and companies begin leaving or
consolidating until the market’s demise.

Competitive Position
The five categories for competitive position are as follows:

1. Dominant – This is rare and typically short-lived. There’s little, if any, competition,
usually a result of bringing a brand-new product to market or having built an extremely
strong reputation in the market (think Microsoft).

2. Strong – Market share is strong and stable, regardless of what your competitors are
doing.

3. Favorable – Your business line enjoys competitive advantages in certain segments of the
market. However, there are many rivals of equal strength, and you have to work to
maintain your advantage.

4. Tenable – Your position in the overall market is small, and market share is based on a
niche, a strong geographic location, or some other product differentiation. Strong
competitors are overtaking your market share by building their products and defining
clear competitive advantages.

5. Weak – There’s continual loss of market share, and your business line, as it exists, is too
small to maintain profitability.
The resulting ADL Matrix looks like this, with the various strategies prescribed for each of the
20 combinations:

Industry Maturity
  Embryoni
Growth Mature Aging
c
C Dominan - - Maintain - Maintain - Maintain
t Aggressive industry position, industry
o push for position and grow market position
  market market share share as the - Reinvest
m share - Invest to industry as
- Invest sustain grows necessary
p faster than growth - Reinvest as
market necessary
e share
dictates
t
Strong - -Aggressive - Maintain - Maintain
Aggressive push for position, industry
i
  push for market share grow market position or
market - Look for share as the cut
t
share ways to industry expenditure
- Look for improve grows s to
i ways to competitive - Reinvest as maximize
improve advantage necessary profit
v competitiv - Invest to (harvest)
e increase - Minimum
e advantage growth and reinvestmen
- Invest position t
  faster than
market
  share
P dictates
o Favorabl - Moderate - Look for - Develop a - Cut
e to ways to niche or expenditure
s aggressive improve other strong s to
push for competitive differentiatin maximize
i market advantage g factor and profit
share and market maintain it. (harvest) or
t - Look for share - Minimum plan a
ways to - Selectively or selective phased
i improve invest to reinvestment withdrawal
competitiv improve - Minimum
o e position investment
advantage or look to
 - Invest get out of
selectively current
investment
Tenable - Look for - Develop a - Develop a - Phased
ways to niche or niche or withdrawal
improve other strong other strong or abandon
industry differentiatin differentiatin market
position g factor and g factor and - Get out of
- Invest maintain it maintain it or investments
very - Invest plan a or divest
selectively selectively phased
  withdrawal.
- Selective
reinvestment
n
Weak - Decide if - Look for - Look for - Abandon
  potential ways to ways to market
benefits improve improve - Divest
outweigh share and share and
costs, position, or position or
otherwise get out of the plan a
get out of market phased
market - Invest or withdrawal
- Invest or divest - Selectively
divest invest or
divest

Using the ADL Matrix

The ADL Matrix provides you with a generic strategy. You’ll need to fine-tune the strategy and
tailor it to your current business.

Step One: Identify your industry maturity category.

Think about the following questions as you decide which stage is most descriptive:

 What are you currently experiencing with market growth?

 How many competitors do you have?
 How large is your market?
 Is your investment increasing or decreasing?
 Are your sales increasing, decreasing or staying the same?
 How is your product differentiated from competitor products?

Deciding on an industry life cycle stage isn’t easy, and competitors’ actions often have a bearing
on this, making it hard to determine and predict. Strategy is not an exact science, so do the best
you can.
Step Two: Determine your competitive position.
Choose the best fit. Be careful not to project what you want your position to be, but what it truly
is. Take a long, hard look at where you’re currently operating.

Tip:
If you’re having trouble finding the perfect match for maturity level
or competitive position, look for the combination that most closely
fits your situation.

Step Three: Plot your matrix position.

Consider the strategies suggested as a starting point for your strategic planning.

Tip:
Look at the strategy recommended as well as those strategies
immediately surrounding it. It can be difficult to pinpoint either of
the dimensions, and your business may be on the cusp between two
positions. By examining close options, you can choose the general
strategic formula with the best fit.

Tip:
It is important to remember that while the ADL Matrix points you in
a general strategic direction; you will probably want to perform
further, more detailed analysis before making a final strategic plan.
So verify you strategic choice using one or more other strategy tools
such as USP Analysis, Porter's Five Forces or Bowman's Strategy
Clock, and then work out what internal changes you will need to
make to implement the strategy effectively. The McKinsey 7S
Framework is among the tools that will help you with this.

Key points:
The ADL Matrix is a great tool for uncovering high level strategies that may be successful for
your business.

By focusing on competitive position and industry maturity, the matrix helps you see the role your
business plays in the larger marketplace. With this big picture view, complemented by other
strategy tools, you will have a great starting place for building your strategic plan.