This strategy framework was put forth by Bruce Henderson of Boston Consulting Group.  In “The Rule of Three and Four,” Bruce Henderson put forth an intriguing hypothesis about the evolution of industry structure and leadership. He posited that a “stable, competitive” industry will never have more than three significant competitors. Moreover, that industry structure will find equilibrium when the market shares of the three companies reach a ratio of approximately 4:2:1.

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Henderson noted that his observation had yet to be validated by rigorous analysis. But it did seem to map closely with the then-current structures of a wide range of industries, from automobiles to soft drinks. He believed that even if the hypothesis were only approximately true, it would have significant implications for businesses.

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