“The Five Forces helped me” Some readers complained that in criticizing the Five Forces analysis I was trashing something that they had found useful. I am glad to hear that some people have found help from Porter’s five-forces model. It Is however a bit Like saying that we had success for over a thousand years In predicting the movements of the planets with the geocentric model of the universe, so why should we accept that the earth revolves around the sun? There are ways to reinterpret Porter’s theories, so that they can appear to make ensue, as Joan Magenta does in her interesting book, understanding Michael Porter.
However redefining the true meaning of “competition” as “adding value to customers” is to flout the standard definition of “competition” in any dictionary. It is also not exactly what Porter actually wrote or what is taught in his name in business schools around the world and apparently practiced by leading consulting firms. There are much simpler and more direct and more fruitful ways of understanding what Is going on, without such intellectual contortions, particularly because the world as changed so much since Porter started putting forward this theories. In astronomy, we decided to move on.
I believe that it is time to do so in business strategy. Balance of power shift isn’t universal Brad Focus wondered whether “the balance has shifted to seller or buyer specifically – this is more industry specific and cannot be generalized. ” The following phenomena affecting the shift In power from seller to buyer are universally applicable: (1) globalization (2) the Internet, Glenn all customers Immediate access to generally reliable Information as to what Is available and Its laity and (2) social media that enables customers to communicate with each other.
The impact of these phenomena is happening at different speeds in different industries. But all industries will receive the impact in due course. At the same time, the internet and social media are huge opportunities for businesses to connect and interact with customers. Inward-looking firms focused on tweaking their own value chain are going to have a tough time of it. Building moats vs. maintaining moats Tree Gruffer made the Interesting point Mimi confuse the ability to Identify a moat or he ability to understand the Importance of a moat, with the ability to actually create a moat or maintain one.
These skills are very different things. People like Ray Crock able to create or maintain a moat. People like Warren Buffet and Charlie Mugger buy barriers. Building them is tough. That an academic consultant would be unable to create or maintain a business with a sustainable competitive or manage that business is not surprising at all. ” The distinction between building moats and maintaining moats is a useful one. People like Ray Crock and not Michael Porter create moats. ” Exactly.
Charlie Mugger and Warren Buffet understand that they are unable to create moats: so they buy them, ready-made and then seek to maintain them. The implication that durable moats can be inferred by studying the structure of the industry has turned out to be false. It may have had some plausibility in the sass when business was dominated by large oligopolies. It is certainly not true now that power has shifted from the seller to the buyer. More balanced accounts of Monitor’s demise?
Dee Shall suggested that readers should seek out more balanced account of Monitor’s demise, such as Novo 14 issue of The Economist. I agree that The Economist piece is a lively read, but in the end, are we any wiser as to why Monitor died or why it did so little in the last five years to avert the obvious impending debacle? The lack of a clear diagnosis is partly because the author appears to share the very assumptions that led to Monitor’s demise. To figure out what went wrong, we need to reexamine fundamental assumptions. To work, strategists!