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Redefine Business Competition with the MacMillan Matrix

To maximize resources and funding, organizations need to focus on what they do best and outsource the rest. Easier said than done, right? The MacMillan Matrix, a tool developed by Wharton School of Business professor Ian MacMillan, was specifically designed to tackle this task.

The MacMillan Matrix can help you discover the program areas that are most needed in your community and that you’re in the best position to provide. The MacMillan Matrix is based on the following assumptions:

  • Nonprofits should avoid duplicating services to ensure that limited resources are used well and quality of service is maximized.

  • Nonprofits should focus on a limited number of high-quality services, instead of providing many mediocre services.

  • Nonprofits should collaborate so that a continuum of service can be provided with each partner focusing on specific pieces.

The MacMillan Matrix, therefore, helps organizations think about some very pragmatic questions:

  • Are we the best organization to provide this service?

  • Is competition good for our clients?

  • Are we spreading ourselves too thin, without the capacity to sustain ourselves?

  • Should we work cooperatively with another organization to provide services?

Using the MacMillan Matrix is a fairly straightforward process of assessing each current (or prospective) program according to four criteria: alignment with mission, program attractiveness, alternative coverage, and competitive position.

MacMillan Matrix: Alignment with mission

Services and programs that belong or fit within an organization are in alignment with the mission. Criteria for a good fit include the following:

  • Supports the purpose and mission of the organization

  • Draws on existing skills in the organization

  • Shares resources and coordinates activities with programs

MacMillan Matrix: Program attractiveness

Program attractiveness is the degree to which a program is attractive to the organization from an economic perspective, such as whether the program easily attracts resources. Here’s a list of criteria that makes a program attractive:

  • High appeal to groups capable of providing current and future support and stable funding

  • Need from a large client base and low resistance to program

  • Appeal to volunteers

  • Measurable, reportable program results

  • Ability to discontinue with relative ease, if necessary

  • Promotion of the self-sufficiency or self-rehabilitation of client base

MacMillan Matrix: Alternative coverage

Alternative coverage is the number of other organizations that deliver a similar program to similar constituents. If no other large, or if very few small, comparable programs are provided in the same region, the program is classified as low coverage. Otherwise, the coverage is high.

MacMillan Matrix: Competitive position

Competitive position is the degree to which the organization has a stronger capability and potential to deliver the program than other agencies. Most programs can’t be classified as being in a strong competitive position unless they have some clear basis for declaring superiority over all competitors in that program category. Criteria for a strong competitive position include the following:

  • Good location and delivery system

  • Large pool of loyal clients, communities, or support groups

  • Past success of securing funding and ability to raise funds, particularly for this type of program

  • Superior track record (or image) of service delivery

  • Better quality service or service delivery than competitors with the most cost effective delivery of service

  • Superiority of technical skills and organizational skills needed for the program

  • Ability to conduct needed research into the program and properly monitor program performance

Five years ago, little funding existed for case management by AIDS Service Organizations. Unwilling to let clients fend for themselves in getting the help they needed, many organizations devoted staff time to this service. At the time, this was a soul of the agency program.

These days, this program is more attractive (fundable) but has a growing alternative coverage. Therefore, organizations in a strong position to serve the clients well, with cultural competence and program expertise, should aggressively compete. Those in a weak competitive position should get out of the business.

Follow these steps and use the figure as a guide to apply the MacMillan Matrix to your organization:

  1. Assess each of your programs in relation to the four criteria; then place each program in the MacMillan Matrix.

    For example, a program that’s a good fit is deemed attractive and strong competitively, but if it has a high alternative coverage, it’s assigned to Aggressive Competition.

  2. Evaluate which programs are worth competing for aggressively and which ones should be divested.

    Critically look at your programs to determine which ones to keep and which ones to eliminate.

  3. Identify whether you have any programs that are a good fit with your mission.

    These programs should have few competitive alternatives, and your organization’s offering should be very strong. MacMillan refers to these programs as the Soul of the Agency and describes them as difficult business but essential to the members.

You can download a detailed overview of the MacMillan Matrix or Google “MacMillan Matrix Overview” and navigate to the Institute for Conservation Leadership.

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