ROI Case File No.299 | 'Metalix's Investment Labyrinth'

Chapter One: Aging Time Bomb—The 15-Year System's Scream

The week after MeatSupply's BSC case was resolved, a consultation arrived from Ibaraki regarding a non-ferrous metal processing company's system renewal. Episode 299 of Volume 24 "Proof of Reproducibility" is a story of coldly identifying business positioning to optimally allocate limited investment budget.

"Detective, our system is at its limit. On-premise sales management system introduced 15 years ago. Maintenance is difficult, and it can't handle site expansion. We want complete renewal, but investment amount is ¥180 million. We don't have budget to renew all divisions. Where should we start..."

Koji Tamura, information systems manager at Metalix, a native of Tsukuba, visited 221B Baker Street unable to hide his anguish. In his hands were aging system failure records and, in stark contrast, approval documents marked "Investment Priority Undecided."

"We process non-ferrous metals in Ibaraki. Copper, aluminum, stainless steel. We have three divisions. The sales management system is company-wide common, but after 15 years of aging, it's screaming."

Metalix's System Crisis: - Founded: 1982 (non-ferrous metal processing) - Annual revenue: ¥5.2 billion - Employees: 180 - Divisions: ①Copper processing, ②Aluminum processing, ③Stainless steel processing - Sites: 5 sites (2 sites five years ago) - Sales management system: Introduced 2010 (15 years passed) - System failures: Monthly average 12 cases - Maintenance cost: ¥12M annually (3x introduction cost) - Renewal estimate: ¥180M (company-wide)

There was deep anxiety in Tamura's voice.

"The problem is we don't have budget to renew all divisions at once. In management meetings, the sales director says 'should renew copper processing first.' The manufacturing director says 'aluminum processing is priority.' The finance director says 'stainless steel processing with largest revenue.' We can't decide whose opinion is correct."

Recent Management Meeting (3rd) Record:

Copper Processing Division Manager: "Copper is our founding business. If this stops, the company tilts. Should prioritize."

Aluminum Processing Division Manager: "Aluminum is growth market. If we invest now, future return is large."

Stainless Steel Processing Division Manager: "Stainless steel accounts for 50% of revenue. Prioritizing largest business is natural."

Finance Director: "All have reasons. But we don't have budget to invest in all. How do we decide?"

Result: No conclusion, carried to 4th meeting

"Can't decide with emotional arguments. We need objective criteria but..."

Chapter Two: Two Axes—Strategic Map Drawn by Growth and Share

"Mr. Tamura, what criteria is current investment decision being considered with?"

To my question, Tamura answered.

"Basically 'loudness of voice.' Each division manager advocates prioritizing their division. We have objective data but don't know how to interpret it."

Current Decision Process (Subjective): - Criteria: Each division manager's advocacy - Data: Exists but not utilized - Problem: Discussion doesn't converge with emotional arguments

I explained the importance of business portfolio.

"Investment decisions are made by strategy, not emotion. PPM—Product Portfolio Management. Market growth rate and relative market share. These two axes clarify investment priority."

⬜️ ChatGPT | Catalyst of Conception

"Don't invest emotionally. With PPM, position businesses in four quadrants"

🟧 Claude | Alchemist of Narrative

"Invest in Stars, obtain funds from Cash Cows. Identify Question Marks, cut Dogs. That is strategy"

🟦 Gemini | Compass of Reason

"PPM is allocation science. Classify into Stars, Cash Cows, Question Marks, Dogs with two axes of market growth rate and share"

The three team members began analysis. Gemini deployed the "PPM Matrix Framework" on the whiteboard.

PPM's Four Quadrants: - Star: High growth, high share → Aggressive investment - Cash Cow: Low growth, high share → Maintain as funding source - Question Mark: High growth, low share → Selective investment - Dog: Low growth, low share → Consider withdrawal

"Mr. Tamura, let's position Metalix's three businesses with PPM and determine investment priority."

Chapter Three: Creating Strategic Map—Cold Positioning of Three Businesses

Phase 1: Market Growth Rate Calculation (2 weeks)

We surveyed growth rate of markets each business belongs to.

Copper Processing Market: - 2019 market size: ¥240B - 2024 market size: ¥228B - Average annual growth rate: -1.0% (shrinking market)

Aluminum Processing Market: - 2019 market size: ¥180B - 2024 market size: ¥252B - Average annual growth rate: +7.0% (growing market)

Stainless Steel Processing Market: - 2019 market size: ¥320B - 2024 market size: ¥336B - Average annual growth rate: +1.0% (slight growth market)

Phase 2: Relative Market Share Calculation (2 weeks)

We compared each business's share with largest competitor.

Copper Processing Business: - Metalix revenue: ¥1.2B - Largest competitor (Company A) revenue: ¥1.8B - Relative share: 1.2÷1.8 = 0.67 (low share)

Aluminum Processing Business: - Metalix revenue: ¥1.4B - Largest competitor (Company B) revenue: ¥1.0B - Relative share: 1.4÷1.0 = 1.40 (high share)

Stainless Steel Processing Business: - Metalix revenue: ¥2.6B - Largest competitor (Company C) revenue: ¥2.2B - Relative share: 2.6÷2.2 = 1.18 (high share)

Phase 3: Positioning on PPM Matrix

Created matrix with two axes.

        High Share (1.0+)    Low Share (<1.0)
High    ┌─────────────┬─────────────┐
Growth  │             │             │
(+5%    │  [Star]     │  [Question  │
above)  │  Aluminum   │   Mark]     │
        │  (Growth+7%)│             │
        │  (Share1.40)│             │
        ├─────────────┼─────────────┤
Low     │  [Cash Cow] │  [Dog]      │
Growth  │  Stainless  │  Copper     │
(<+5%)  │  (Growth+1%)│  (Growth-1%)│
        │  (Share1.18)│  (Share0.67)│
        └─────────────┴─────────────┘

Tamura was stunned.

"The founding business copper processing is... a 'Dog'..."

Phase 4: Determining Strategic Direction for Each Business

Based on PPM, determined investment strategy for each business.

[Star] Aluminum Processing: Top Priority Investment - Market growing, share also high - Cash Cow candidate for future - Strategy: Prioritize system renewal, further share expansion

Investment Policy: - System renewal: Full implementation (¥80M investment) - Sales system strengthening: Personnel +3 - Production capacity expansion: Equipment investment

[Cash Cow] Stainless Steel Processing: Maintain and Streamline - Market slight growth, share high - Stable revenue source - Strategy: Minimum system renewal, cost reduction through efficiency

Investment Policy: - System renewal: Minimum necessary (¥45M investment) - Status quo maintenance, refrain from new investment - Allocate profit to Star (Aluminum)

[Dog] Copper Processing: Consider Withdrawal - Market shrinking, share also low - Difficult to recover even with investment - Strategy: Defer system renewal, consider business sale

Investment Policy: - System renewal: Don't implement (zero investment) - Prolong with current system (minimum maintenance only) - Business sale or withdrawal within 3 years

Phase 5: Investment Allocation Decision

PPM-based investment allocation:

Reduced by ¥55M from initial estimate of ¥180M.

Chapter Four: Cold Decision—Strategy Execution Beyond Emotion

Phase 6: Management Meeting Explanation (1 week)

Presented PPM results to management.

Copper Processing Division Manager's Reaction: "Are you abandoning the founding business...!"

Tamura calmly answered.

"Not abandoning. The market is shrinking and we're inferior in share to competitors. Even investing here, we can't recover. Meanwhile, aluminum is growth market and we have advantage. We should concentrate limited funds on winnable battlefields."

Finance Director: "PPM is theoretically correct. But copper processing has longtime customers. Can't cut immediately."

Tamura proposed.

"Let's set a 3-year grace period. During that time, copper processing prolongs with current system. Simultaneously, we search for business transfer destinations. Negotiate on condition that transfer destination continues employee employment."

Management Meeting Conclusion: - Aluminum processing: Priority system renewal (¥80M) - Stainless steel processing: Minimum renewal (¥45M) - Copper processing: Status quo, business transfer within 3 years

Phase 7: Results After 18 Months

[Star] Aluminum Processing Business: - System renewal complete (¥80M investment) - Business efficiency: 40% improvement - Revenue: ¥1.4B → ¥1.9B (+36%) - Share: 1.40 → 1.85 (further expanded) - Result: Continues growth as Star

[Cash Cow] Stainless Steel Processing Business: - Minimum system renewal complete (¥45M investment) - Business efficiency: 18% improvement - Revenue: ¥2.6B → ¥2.7B (flat) - Operating profit margin: 12% → 16% (cost reduction through efficiency) - Result: Functions as stable revenue source

[Dog] Copper Processing Business: - No system renewal (zero investment) - Month 18: Business transfer destination decided (Company D: copper specialist manufacturer) - 12 employees: All transferred to Company D (employment maintained) - Transfer price: ¥280M - Result: Not withdrawal but appropriate business succession

Company-Wide Results After 24 Months:

Financial Metrics: - Annual revenue: ¥5.2B → ¥5.8B (+12%) - Aluminum growth as driver - Operating profit margin: 7% → 13% - Stainless efficiency, copper transfer profit - System investment: ¥125M (¥55M less than initially planned) - Payback period: 14 months

Organizational Change: - Aluminum division: Personnel +8, sites +1 - Stainless steel division: Status quo - Copper division: Transferred to Company D, employee employment maintained

Strategy Success: - Concentrated limited funds on winnable business - Didn't cut Dogs, appropriately succeeded - Entire company on growth trajectory through Star growth

Chapter Five: Detective's Diagnosis—Cold Allocation Saves Organization

That night, I reflected on PPM's essence.

People judge emotionally. "Because founding business," "because attached," they continue investing in Dogs.

But PPM is cold. Position businesses in four quadrants with two axes of market growth rate and share. Then invest in Stars, obtain funds from Cash Cows, cut Dogs.

Metalix's copper processing business was a Dog. But Tamura didn't cut it. Through business transfer, protected employee employment and found appropriate successor.

PPM is cold but not ruthless. Correct allocation saves entire organization.

"Don't invest emotionally. Position with PPM, strategically allocate resources. Nurture Stars, protect Cash Cows, succeed Dogs"

The next case will also depict the moment when PPM optimally allocates limited resources.

"Those who invest in everything obtain nothing. Position with PPM, concentrate resources on winnable battlefields"—From the detective's notebook

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