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.
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.