Arthur D. Little’s matrix for technological decisions

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Diversi sono gli strumenti sviluppati per facilitare il processo decisionale strategico in base agli investimenti tecnologici. Tipici sono gli strumenti

There are several tools developed to facilitate strategic decision-making based on technological investments. Typical are the tools that classify technologies in terms of open availability and ease with which they can be protected and used as a strategic advantage.

Arthur D. Little’s ADL Matrix ¹ is a portfolio ²

management method that evaluates the industry and assesses the strengths of a business according to its size.

Sector measurement is an identification of the sector life cycle.

The measure of business strength is a categorization of the company’s technological knowledge into one of five competitive positions: dominant, strong, favorable, plausible, weak. This leads to a table broken down into five competitive positions across four life cycle stages.

Positioning in the table identifies a general strategy.

Figura 1 – The Matrice ADL [Fonte: www.toolshero.com]

• Base technologies represent those on which product / service innovations are based and which are vital for the company. However, they are also widely known and distributed by competitors and offer little potential competitive advantage;
• Key technologies represent those which form the core of current products / services or processes and which have a high competitive impact. These are strategically important technologies for the organization and can be protected by patents or other forms;
• The technologies to stimulate (Pacing technologies) are those that are at the forefront of the current competitive game and can be subject to experimentation by competitors: these technologies have a high, but not yet sustained, competitive potential; 
• Emerging technologies are those that are at the technological frontier, still under development and whose impact is promising, but not yet clear.

A model of this type can be perfected by adding matrix information on the various markets and their growth or decline rate. A new rapidly growing market may require huge investments in technology to take advantage of the opportunities created, while a mature or declining market may be better served by a strategy that uses basic technology to help maintain a low cost position.

Portfolio Portfolio management of the ADL matrix

In the ADL Matrix method, to define the strategy one must identify discrete businesses by identifying commonalities between the products and the business lines. This using the following criteria as a reference guide:

• Common rivals 
• Prices
• Customers 
• Qu Quality / Style
• Substitutability
• Divestment or liquidation

The assessment of the phase of the life cycle of the sector

The assessment of the life cycle phase of the sector of each company is based on:

• Market shares of the business; 
• Investments 
• Profitability and cash flows

The evaluation of the competitive position

The competitive position of a company is based on an evaluation of the following criteria:

• Dominant: Rare, often the result of a quasi-monopoly or protected leadership;
• Strong: A strong company can follow a strategy without too much consideration of the movements from rival companies; 
• Favorable: The sector is fragmented. There is no defined leader among the strongest rivals;
• Tenable: The company occupies a niche, both geographic and defined by the product;
• Weak: The business is too small to generate profits or survive in the long term. Critical weaknesses.

Limitations 

Certainly some limitations of the ADL Matrix are:

• A standard lifecycle length is not defined;
• Determining the current phase of the sector life cycle is rather difficult; 
• Competitors can influence the length of the life cycle.

Despite this, the ADL Matrix facilitates the strategic decision-making process with reference to technological investments and constitutes a useful method of portfolio management.

^{1 Arthur D. Little’s ADL Matrix is a management consulting firm specializing in strategy and operations management that has been offering professional services to businesses since 1886. Arthur D. Little was the first company to offer technological research services on order.}

2 That is, of product portfolio.

Bibliography:

• https://www.adlittle.com/
• https://www.youtube.com/channel/UCFtUfkCYoxHqCQMJdd9g2DA
• https://www.adlittle.com/